Investors pour money into stocks based on speculations rather than weighing on merits, said Md Moniruzzaman, vice-president of the Bangladesh Merchant Bankers Association.
The index dropped to near 3,600 points in 2020, battered by the pandemic, but the market rebounded strongly last year under the new leadership of the commission, he said.
"But the market growth was not sustainable. We have seen several short-lived rallies since 2010 and we don't yet see any sustainable growth," he said.
He was speaking as a panelist at the seminar titled 'Prospects and Challenges of Bangladesh's Capital Market,' organized by the Economic Reporters Forum (ERF). ERF President Sharmeen Rinvy presided over the event while ERF Secretary Rashidul Islam moderated the event.
Professor Shibli Rubayat Ul Islam, chairman of the Bangladesh Securities and Exchange Commission (BSEC), was the chief guest.
Mr Moniruzzaman, also managing director of IDLC Investments, said there is a tendency to boost the market index through a demand side mechanism but the impact does not last long.
"So there is no merit-based investment here and the investors invest in the market mostly on speculations. If we enter any brokerage house, we hardly find investors making profits from the capital market in recent times".
Azam J Chowdhury, former president of the Bangladesh Association of Publicly listed companies, said stock market fluctuations were a common thing across the world.
"To reduce the market volatility, we have to strengthen the bond market and mutual funds.
He said most of the banks were suffering from capital shortfalls and many banks had raised capital by issuing bonds.
Mr Chowdhury urged the regulator to allow banks to raise capital by issuing bonds after an analysis of their real assets.
DSE Chairman Eunusur Rahman while highlighting various challenges of the capital market said policy support in the stock market was still insufficient.
Large companies can take loans from banks at 8 per cent interest rate, which is why they are reluctant to go public.
CSE Chairman Asif Ibrahim said there was no commodity exchange in Bangladesh yet.
"We'll ink an agreement very soon with the Indian multi commodity exchange. We've already sent the draft rules to BSEC in this regard. If we get approval, then hopefully we'll be able to launch a commodity exchange,"
He informed that as many as 12 companies were planning to raise around Tk 7.0 billion from the capital market through initial public offerings (IPO).
The business entities are choosing the stock market for sourcing finance at a time when bank money is going to become costlier amid liquidity crunch, he added.