DSEX slumps to nearly 5-year low as blue-chip stocks nosedive

Defeating the seasoned optimistic investors, Dhaka bourse's broad-based index DSEX broke below the 4,800 mark on Thursday (15 May) for the first time since 2020 as heavyweight blue chips nosedived.

Unlike the common days when blue-chip investors felt assured of the stability of their accounts, the strengthening virus of market pessimism kept dragging down most of the vaccinated stocks like Square Pharmaceuticals, from their previous stable ranges.

Blue-chip stocks are considered vaccinated due to their superior business and stock performance.

DSEX ended its fifth consecutive bearish week with a 2.47% fall to 4,781, the lowest since 25 August 2020. Outpacing the general index, blue-chip index DS30 fell 2.76% over the week to 1,770.

Analysts blamed an intensifying fear of further currency devaluation as the central bank opted for more market-based exchange rates to secure the remaining tranches of International Monetary Fund loans.

Long-term value investors who tend to bag beaten-down blue-chip stocks at bargains seemed to be less interested this week as psychological factors dominated further, especially when the regulator and the market players are gradually diverging in their ways, said market people.

"No one is feeling safe in the stock market now, regardless of how undervalued their stocks are," Ali Ashraf, a retail investor, was saying at a Motijheel, Dhaka trading floor during the last closing bell of the week.

The previous week ended with an effort to bounce back that did not happen this week. Square Pharmaceuticals shares fell by 2.11% this week, which was less than expected to investors like Ashraf.

Walton Hi-Tech Industries, announcing its outlet opening abroad, saw a 9% erosion in its market capitalisation.

British American Tobacco shares fell by 4.36% to Tk295.9 apiece for the first time after 2020.

Market-leading companies, including lubricant and liquefied petroleum gas giant MJL Bangladesh, non-bank financial institution IDLC, and biscuit maker Olympic too went into the grip of the bears.

"Investors' bearish sentiment aggravated with no positive signs of an immediate recovery," EBL Securities wrote in its weekly market recap.

Although starting with a sense of cautious optimism surrounding the chief adviser's meeting over the prevailing market crisis, it quickly faded due to short of any strong outcomes to stimulate a positive momentum, triggering a renewed selling spree, it added.

"Investors preferred to adopt a cautious stance ahead of the upcoming budget declaration for the next fiscal year that also allowed the bearish forces to firm their controls over the realm of the market's momentum."

Average daily turnover dropped by 33% to Tk325 crore this week. Against the 50 gainers, 322 scrips declined in the Dhaka bourse.

Other than general insurance, no sector was marked safe this week.

Investors, however, showed their confidence in a handful of strong banks that are benefiting from the ongoing deposit flight to quality amid jitters in the banking industry.