Market faces correction with decrease in turnover

Stocks are in a correction phase now following a seven-week-long rally since the beginning of July.

Daily turnover dropped below the Tk1,000-crore mark, frustrating the brokerage industry which began to increase efforts in business based on rising market activities.

The Dhaka Stock Exchange (DSE) witnessed Tk729-crore turnover on Monday, which was nearly the double of two weeks ago.

DSEX, the key benchmark at the Dhaka Stock Exchange (DSE), lost 32 points,a 0.68-percent correction, on Monday following a flat session on Sunday.

Profit bookers had been pushing the indices down until 12:30pm while bargain hunters came back to recover most of the intraday loss at the end. DSEX closed the day at 4,762, which was above 4,950 on August 17.

Floor traders told The Business Standard that many investors came up to book profits they had achieved during the latest rally and that some investors were also trying to liquidate their profitable positions in various stocks held over years with losses.

"This is something like breathing in the market, and the ongoing correction is healthy of course," said veteran stockbroker Rakibur Rahman, also a board member of the DSE.

He believes the recent connectivity disruption at the premier bourse caused the slowdown in trading volume.

"The market is back in action as the investors now are confident about economic recovery and good governance on the capital market," he said.

However, appetite for some poorly performing companies' stocks has recently increased based on regulatory initiatives to bring them back in business through better governance or a restructuring of their leadership in case of failure.

At the DSE, five of the top ten gainers were such companies on Monday.

On the other hand, selective companies' indices like blue chip index, DS 30, or Shariah compliant companies index, DSES, lost less, indicating a better appetite for those stocks.

The two indices fell by around 0.3 percent while broad-based index, DSEX, dropped by 0.68 percent.

EBL Securities in its daily market commentary said investors remained cautious following the news of an increase in banks' classified loans.

The country's ailing banking sector recently reported an increase of classified loans to 9.16 percent in the April-June quarter of fiscal year 2019-20 as most of the borrowers failed to repay loans due to the impact of the Covid-19 on their business.

Analysts at the brokerage firm also noted that investors were watching undervalued stocks in specific sectors which had return potentials during the ongoing season of earnings declaration.

However, investors' attention and participation was mostly concentrated on the pharmaceutical and chemical sectors that occupied over 20 percent of daily turnover, followed by miscellaneous and banking sectors.

Among all the sectors, jute, telecommunication and food topped the table of market capitalisation gains while the non-banking financial institutions, life and non-life insurance, and IT sectors suffered the biggest declines following recent gains.

Out of 354 issues traded at the DSE, 89 advanced, 232 declined and price of 33 remained unchanged on Monday.

At the port city bourse, the Chittagong Stock Exchange, all the indices faced corrections. Broader indices, that include more stocks as constituents lost more points there, indicated a bigger price correction for average company shares.