Stocks nosedive amid aggressive profit booking

The stock market surrendered to the sellers on Monday amid aggressive profit booking.

With 80% scrips ending in red, the indices at both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) nosedived.

DSEX, the benchmark index of the Dhaka bourse tumbled by 77.6 points or 1.07% from Monday's close.

The index had shot up to over its record high of 7,336 points on Sunday morning and slid 133 points at the end of the session amid the mass investors' dilemma regarding the direction after a stunning 34% year-to-date gain to increase the market observers' "pump and dump" concerns.

On Monday, the market was trying to recover and at least successfully halted the downfall with the support of the most bouncing back stocks and some rallying multinational scrips.

The beginning of Tuesday session was a continuation of the feel-relief factor in investors' mind, but since investors rushed to book profits from any shares the market began sliding in the first half an hour and buyers failed to rescue the market.

Financial scrips seemed to have survived the selling spree, while most of the manufacturing stocks slid a lot.

Price correction of the heavyweight shares added to the index fall.  

Blue-chip index DS30 managed to limit its fall to 0.89% while Shariah Index DSES closed 1.43% lower than the previous close.

Investors' participation, however, did not fall and DSE turnover was 2.8% up on the red day.

On Tuesday, investors' felt nervous about the apparent tussle between the central bank and the securities regulator regarding regulating lending entities from their own jurisdiction.

Earlier, the securities regulators order to three large cap companies Walton Hi-Tech Industries, Berger Paints Bangladesh and the Investment Corporation of Bangladesh to ensure 10% free-float shares in a year panicked the investors as the upcoming supply of the company shares would take more than TK5,000 crore out of the secondary market.

Each of the three stocks suffered free fall in the market on Monday following the Sunday's separate orders and later on Tuesday found some buyers at a lower price.

Walton representatives met BSEC officials

Walton representatives met the top Bangladesh Securities and Exchange Commission (BSEC) officials on Tuesday to propose a slower offloading of the directed 9.03% company shares and the regulators assured them of a positive feedback soon.

Walton entrepreneurs need some time to find out a way to utilize the money they are set to get from offloading a part of their stake in the large-cap company and also a slower pace in offloading would help the investors through a better balance between demand and supply, said Walton's Additional Managing Director Abul Bashar Howlader, a member of the visiting team.

They proposed to offload 4.03% shares until the lock-in period ends in three years of listing and the remaining 5% shares to be offloaded after the lock-in ends, if BSEC accepts their proposal.

To avert any sudden oversupply BSEC ordered the companies' sponsor-directors not to sell more than 1% company shares in a month while Walton proposed for a quarterly bar as they expect more than double time to offload less than half of the planned shares.  

Complying with the further offloading direction in a year seems unlikely also for the state-owned ICB and the multinational paints giant Berger, believe market observers.