Rate hike and stock market

The country's stock market has been passing a dull time for long. There is a shortage of good stocks. There is also a lack of adequate investment. Moreover, many investors are already stacked in the market. Their share prices have reached the lowest level. They are not in a position to offload those due to potential loss. Small investors are facing the most difficulties.

Now, Bangladesh Bank has increased the policy rates. So, banks and financial institutions have also started increasing their interest rates. Higher deposit rates in banks will divert some funds from the stock market. Some were thinking of investing in the stock market. Now, they will also go for deposits in banks. Again, banks are also increasing lending rates. It means the financing costs of listed companies will rise, too. The rise in cost will narrow the profit margins. The result will be a decline in stock prices. Investors in the market will be the ultimate losers.

Asad Sujan

Narayanganj

musicsujan@gmail.com