Stocks go into free fall

The stock market enthusiasm seems to have been eroding over the past one week and prices are falling free following the sharp rallies.

DSEX, the broad-based benchmark of the Dhaka Stock Exchange (DSE), dropped by more than 300 points – or around 4% – in six consecutive down sessions.

The fall eroded over Tk11,500 crore from the DSE market capitalisation, which stood at Tk5.71 lakh crore after Monday's fall.

On Monday, the index slipped 89 points, or 1.25%, to close at 7,097, which was the lowest since 8 September.

"Literally, an opposite scenario we are facing nowadays," said Mizanur Rahman, a stock investor.

Almost all the stocks were gaining in recent months and now no stock can sustain their prices, regardless how much they gained in recent months, said Sohel, a trader at a brokerage firm in Motijheel.

"Panic grabbed the market as holding stocks turned synonymous to capital erosion," he added.

The trading board reflects his observation as only 33 DSE scrips advanced on Monday, while 324 declined and price of 17 remained unchanged.

Why?

Analysts said the market indices more than doubled in the 15 months up to the end of September. Record low interest amid an increased money market liquidity alongside the Covid-19 resilience of the economy and most listed firms fuelled the rally.

Most of the stocks gained a lot over the long rally, while in the last two months some large-cap companies like LafargeHolcim, Orion Pharmaceuticals generated more than 50% return for their investors.

Naturally, many investors are booking profits amid no fresh stimuli for the market.

Instead, stimuli are likely to fade away as the money market is in a trend to emerge back from the ultra-liquidity, inflation is hitting daily lives, and the rapidly surging global commodity prices are threatening manufacturers' profitability.

Also, the Bangladesh Bank's recent cautious stance regarding the stock market triggered the profit booking moves by stock investors, said brokerage official Sohel.

On the other hand, the capital market regulator has been urging investors to go through company fundamentals to make their investment decisions instead of staring at the index trail which gives a sense of an overbought situation.

Professor Shibli Rubayat-Ul-Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC) said in several public events that many stocks are still investable as their price is not much high if their earnings considered.

However, the market seems not to give an ear.

The blue-chip index DS30 which constitutes selective large-cap stocks fell 0.98% to 2,678 on Monday.

Shariah-compliant stocks index DSES fell by 1.36% to close at 1,525.