Continuous free fall drags DSEX to a 78-day low

Stock free fall continued as investors fear further market correction amid a gloomy short-term outlook and a chaotic regulatory environment.

A fresh round of selloff over the last seven sessions pushed DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), to 6,799 points as it fell 0.82% on Monday.

The index plunged below the 6,800-mark for the first time since 22 August, rejecting its early October peak at 7,410.

The investors who bet on the growing economy and the better than expected corporate performance during the pandemic appeared to be increasingly frustrated as their capital eroded in the six of the last seven trading sessions.

Stockbrokers observed an increasing fear among investors regarding a gradual divergence between the capital market regulator and the central bank.

The Bangladesh Bank is acting firmly to regulate banks' activities in the capital market and it is also declining to adjust its policy stances in line with what the Bangladesh Securities and Exchange Commission (BSEC) needs for the capital market.

The central bank keeps ignoring the calls for relaxing banks' capital market exposure calculation method to allow them to invest more in listed perpetual bonds, or for allowing banks to form nomination and remuneration committees to comply with the BSEC's Corporate Governance Code for better governance within the listed firms.

"Whenever the two regulators preferred tussle between them, the market suffered selloff and this time too, it is no different. I am in a panic now, 36% of my capital eroded in the last one month," Tanvir Ahmed, a retail investor, expressed his frustration at a brokerage firm in Motijheel.

"The regulators must sit together and come up with a win-win solution."  

The stock market began to suffer selloffs in early October as soon as the DSEX more than doubled in 15 months and analysts found that the downward pressure on interest rates was already over, taka was losing ground against US Dollar, and the central bank and the BSEC were parting their ways abruptly.

As weeks passed, negative headlines regarding the economy kept deteriorating investors' outlook, be it for the rising global commodity prices, or the drop in remittance income, or the most recent sharp hike in diesel price followed by transport sector strike that increased inflation worries.

EBL Securities wrote in their daily market commentary on Monday, temporary upward momentums failed to withhold the indices as many investors started liquidating portfolios and engaged in selloffs amidst daylong volatility in the market.

Most investors were carefully watching the fluctuations of stock prices while the rift between the BSEC and the Bangladesh Bank exacerbated the bearishness on the trading floor and made investors nervous.

"As a result, many investors remained on the sidelines amid a lack of market direction."

The total turnover in the DSE declined 6.15% to Tk1,075 crore on Monday. Pharmaceuticals, textiles, and banking sectors contributed most to the daily turnover.

The pessimism was reflected in the advance to decline ratio in the bourse as only 55 scrips in the DSE advanced on Monday against a decline of 295 while 26 remain unchanged.

Paper, general insurance, and financial institutions suffered the biggest contraction in their market capitalisation, 3.2%, 2.6%, and 2.5% respectively.

Only the IT sector generated positive returns on the sellers' day.

The Chittagong Stock Exchange also suffered a similarly bad day as its broad index CSCX plunged by more than 1% to 11,936 points.

Turnover in the port city bourse increased to Tk34.76 crore on Monday from Tk27.16 in the previous session.