Turnover at the Dhaka Stock Exchange (DSE) on Wednesday dropped by 31% to Tk 545 crore, the lowest since 29 July.
Following the previous session's gains, the market indices were moderately down.
Market professionals pointed out two factors behind the sudden slowdown in trading activities. Firstly, the ongoing subscription in the country's largest ever initial public offering (IPO) by telecom operator Robi.
The other possible factor is the securities regulator's strong stance against market manipulation and other malpractices that may have shaken some movers and shakers in the market.
"I am not sure about the exact reasons, but it is likely that some retail investors are trying to release some of their investment account funds to subscribe to the huge telecom IPO," said Md Shakil Rizvi, managing director of Shakil Rizvi Stocks Ltd and a director at the DSE.
"It [the slowdown and sale pressure] happens during the subscription period of large IPOs," he added.
Robi, the country's second largest telecom operator, opened for IPO subscription on Tuesday. The company has the securities regulator's approval to collect Tk523.7 crore from investors through IPO, where new shares will be issued at the face value of Tk10 each.
"The stock market in recent months has been marching ahead through sector-wise rotational price movements. Regardless of the justification, a large number of investors are following trends inside and any transition during trend shifts tend to result in a slowdown as a large number of investors turn watchful instead of being active in trading," explained Shakil.
The Bangladesh Securities and Exchange Commission (BSEC) on Tuesday formed an investigation committee to look into the recent extreme price hike of five closed-end mutual funds.
It also announced a stronger stance against insider trading and market manipulation on Wednesday through imposing penalties on Stylecraft insiders and manipulators, with the amounts being bigger than their proven gains in illegal trading activities.
A floor trader told The Business Standard on Wednesday, "Unfortunately, a large number of investors were irrationally counting on trendy sectors to gain more and more. The news of investigation into mutual fund price hikes has shaken the large investors who have the strength to create trends. Also, their followers are less confident today."
Abu Ahmed, an honorary professor of economics at the University of Dhaka, opined that the regulator must stick to its job regardless of market activities.
"Stock price – if extremely deviates from company fundamentals and if good governance is not ensured – is not sustainable," he said.
Turnover at the DSE usually tends to rise and fall in a gradual manner. However, there have been several significant jumps and drops depending on sentiment and liquidity affecting events this year.
Rakibur Rahman, another DSE director, believes the situation is temporary and market activities will bounce back soon as investors always tend to look for the next opportunity.