Stocks suffered a selloff in the bourses of Dhaka and Chattogram on Monday as money market liquidity is gradually going against investors.
DSEX, the broad-based index at the Dhaka Stock Exchange (DSE), fell 0.89% to close at 7,022 points as the majority of stocks declined.
Large-cap banking stocks, following a week of the sharp rally, suffered the maximum selling pressure as investors preferred profit booking, EBL Securities said in its daily market commentary after the trading hours.
"Amidst the volatility, investors got the opportunity to rebalance their portfolios as bargain hunters are booking dividend yield from the June-closing scrips," the brokerage firm's analysts added.
When stocks trade cheaper, dividend yield goes higher as investors get more dividends against their invested capital to own the stocks.
The listed companies – other than financial service providers and some multinationals – close their annual accounts at the end of June and now they are in the season of dividend declaration, arranging shareholders' general meetings and finally disbursing the dividends.
"The deepening worries of the liquidity stress in the money market is also being viewed cautiously by the investors," EBL Securities also said.
The money market has been heating up in recent days due to a shortage of surplus call-ready taka in the banking industry, while the surplus liquidity has mostly been concentrated on a few banks.
Leaving behind the recent months of abundant liquid money earlier this year, the money market is in a trend of contracting liquidity amid the central bank's continuous efforts to stabilise the exchange rate through selling foreign currency to banks and mop up local currency against that, while businesses and families are also in need of more money to pay their inflated bills as the inflation rates are going higher.
Since a liquid money market situation inspires investors to look for higher-return investment alternatives like stocks. While money has a diversified utilisation with a decent return expectation, many investors prefer less stock investment.
In the volatile market situation, a portion of investors appeared to behave more watchfully than actively participating in daily trading, and that caused a 31% drop in the daily turnover at the DSE.
Sunday was a good day for bank investors while their stocks are relatively cheaper at the DSE if compared against their earnings per share.
More transactions of the large-cap banking scrips helped the DSE register 22.3% higher or Tk1,786 crore in daily turnover after more than a month of trade contraction.
The banking sector's market capitalisation contracted by 2.9% on Monday, to wipe out the entire sectoral gain on Sunday.
Banks' contribution to daily turnover at the Dhaka bourse remained above Sunday's level of 43.5%.
Textile and pharmaceuticals sectors were in the second and third spots to make the DSE turnover on Monday.
Out of the 359 issues traded, 104 advanced, 216 declined, and 39 remained unchanged.
Most of the sectors exerted dismal performance on Monday. Cement and jute were in the immediate next spots to banks to see a contraction in market capitalisation.
On the other hand, travel and leisure, ceramic and miscellaneous sectors led the green part on the table of sectoral gains on Monday.
Indices in the Chittagong Stock Exchange also closed in the red terrain.