Stocks nosedive again post-budget

Infographics: TBS

Stock investors' frustration with the proposed national budget was evident in today's (3 June) trading as the Dhaka Stock Exchange's (DSE) key index plunged again, breaking a three-day recovery streak.

The DSEX fell by 0.52% to close at 4,664 while turnover in the premier bourse dropped 17% to Tk229 crore, the lowest since 4 August last year.

Stakeholders said the budget addressed several issues to support struggling market intermediaries, not the bleeding investors. On the other hand, the absence of strong growth-oriented policies in the budget made investors more cautious.

The DSEX saw a brief surge past the 4,700-mark following the opening bell on the first trading session after the budget proposal by the finance adviser. However, the momentum quickly faded as frustrated investors turned to selling, dragging the benchmark index down steadily throughout the rest of the session.

How investors see the budget

"Although the proposed budget included some incentives aimed at the broader development of the capital market, investors also expected specific policy measures that could directly boost market sentiment," EBL Securities wrote in its daily market commentary today.

"Hence, lack of such short-term respite for investors reignited selling pressure, prompting the majority of scrips to witness correction today [Tuesday]," it added.

"Investor sentiment weakened further amid the absence of any strong immediate stimulus in the fiscal budget to revive the sluggish market," the commentary noted.

Analysts at different investment firms also flagged concerns about the government's increased borrowing from banks to finance the budget deficit for FY26, warning that it might deprive the market of funds. There was also an expectation for a higher limit of tax-free dividend income but the proposed budget ignored it.

To enhance stock trading on the bourses and let the brokerage industry breathe, the advanced income tax has been rationalised to Tk0.3 against every Tk1,000 turnover from Tk0.5.

Merchant banks, mostly in critical financial condition, will pay 27.5% corporate tax, down from 37.5%.

Listed firms' corporate tax remained unchanged. However, the corporate tax rate for listed firms remained unchanged, though the criteria for a 2.5% tax rebate were slightly relaxed.

A brokerage firm CEO said investors are fond of growth and the budget proposed this year was smaller than the previous one for the first time in Bangladesh.

"Increased turnover tax, higher duties and VAT for many sectors, and relaxed import duties to facilitate trade negotiations, all these could hurt businesses," he added.

Most investors opted to remain observant of the market's momentum, while upcoming long Eid holidays also contributed to the subdued market participation.

On the sectoral front, banking stocks led the turnover contribution making 20.3% of the daily turnover in the premier bourse, followed by food and textile sectors.

Sectors mostly displayed dismal returns, out of which financial institutions, service and textile led the fall with 2.2%, 1.4% and 1.2% decline in their respective market capitalisation.

Out of the 397 issues traded, 92 advanced, 239 declined and 66 remained unchanged.