DSEX slides 1.35% amid money market and inflation worries

Stocks plunged on Wednesday as the tightening liquidity in the money market and the inflation spike increased investors' worry.

DSEX, the benchmark index of the Dhaka Stock Exchange (DSE) sharply fell by 1.35% on Wednesday to close at 6,918 points.

The index that has been falling since Sunday has wiped out the entire gain of the previous week in a recovery phase.

"Equity indices are in the doldrums as the market momentum has weakened due to the tightening liquidity situation in the money market while inflation spikes added worries to the downbeat mood of investors," EBL Securities wrote in their daily market commentary on Wednesday.

The interest rate in the interbank market of call money - which banks borrow from each other to meet their overnight demand for cash - has doubled in a week amid a sudden increase in demand for cash in the economy.

"Investors were quite shaky and engaged in a selling spree in the stocks which recently outperformed in the market," it added.

Correction in largely capitalised banking stocks intensified the market fall.

Mysteriously, One Bank stock which was below Tk13 per share earlier last week jumped to Tk20 on Wednesday morning and closed at Tk18.5.

Recently, the demand for the private sector commercial bank's stock increased even though the bank was fined by the central bank for inflating its 2020 annual financial statements, while its non-performing loans rose to over 9% at the end of September.

Stockbrokers informed, a young cult individual investor who emerged as the most influential market player last year is behind the unusual price hike in One Bank stocks,  he in collaboration with his followers, manipulated several stocks this year.

The abnormal rise of his stocks' prices created a selling pressure in other stocks as many chases the rising ones selling off their holdings, observed the stockbrokers who spoke to The Business Standard seeking anonymity.

Market volatility again decreased the daily turnover by 14% to Tk1,130 crore on Wednesday as many investors turned watchful instead of triggering their buy-sell decisions.

The banking sector made over one-third of the day's turnover in the DSE.

The selling spree allowed only 75 of the DSE scrips to advance, while 259 declined, and 31 remained unchanged.

No sector, except paper and tannery, survived the sharp selloff on Wednesday as all suffered market capitalisation contraction.