The stock market witnessed yet another massive setback on Thursday, with the key index of the Dhaka bourse sinking below 5,700-mark for the first time in nearly three years.
The market has already been bearish since the removal of the floor price while macroeconomic uncertainties stemming from the recent geopolitical crisis have further dampened investor sentiment.
Right from the start of the trading session, panicked investors started to dump their holdings as they could not be hopeful of any turnaround in the market, causing the indices to plunge.
Substantial price erosion of large-cap stocks dragged the Dhaka Stock Exchange (DSE) by more than 77 points or 1.33 per cent to 5,686, the lowest since May 9, 2021.
Beacon Pharma, BAT Bangladesh, National Bank, Renata, and Pubali Bank suffered the biggest losses and contributed largely to Thursday's market plunge. They jointly accounted for one-fourth of the day's index decline.
The DSEX index lost 650 points or 10 per cent since the withdrawal of floor price on January 18. The overall market lost Tk 816 billion in asset value during the time.
Market analysts blamed the rising interest rates that turned fixed-income instruments more lucrative compared to stock market return.
The growing deposit rates in the banking sector and higher returns from Treasury bonds are luring savers to the money market from the stock market, said Md Sajedul Islam, managing director of Shyamol Equity Management.
Institutional investors are mostly in a hands-off position amid a liquidity crunch while small investors are not confident enough to inject fresh funds into the market, he added.
The stock market has been suffering from a liquidity crisis for a long time amid a tightening of the money market.
The maximum lending rate jumped to 13.55 per cent for April as SMART (six-months moving average rate of Treasury bills) rose to 10.55 per cent from 9.61 per cent the month before.
Usually, the equity market tends to weaken when interest rates rise and funds get diverted to the money market.
Moreover, investors fear further damage to the market, owing to a deepening global crisis for Iran's attack on Israel.
"Stocks logged continuous hurdles owing to the depressed market sentiment as investors remained apprehensive over concerns regarding the market outlook," said EBL Securities.
"The jittery investors are rattled by the rising tensions over the Middle-East geopolitical crisis and its probable economic impacts that can potentially affect the market outlook," said the stockbroker.
The stockbroker added that the market had been wading through a prolonged downbeat vibe, and the market sentiment would be unlikely to rebound until there were significant catalysts to counter the prevailing pessimism.
However, Mr Islam said that such a massive index plunge was unexpected and general investors had no reason to sell their stocks as the attack on Israel was in retaliation and was not a declaration of war.
The blue chip index DS30, a group of 30 prominent companies, shed almost 23 points to 1984 while the DSES Index, which represents Shariah-based companies, lost 16 points to 1246.
Turnover, a crucial indicator of the market, was Tk 5.23 billion on Thursday, up from Tk 4.82 billion the day before amid a selling pressure.
More than 86 per cent traded shares saw price fall. Out of 395 issues traded, 342 declined, 29 advanced, and 24 remained unchanged on the DSE trading floor.
Newly-listed Asiatic Laboratories dominated the turnover chart, with shares worth Tk 392 million changing hands, followed by Best Holdings, Lovello ice-cream, Alif Industries, and Golden Son.
Asiatic Laboratories was the day's highest gainer, posting a 9.95 per cent increase, while Fareast Finance was the worst loser, having shed 6.97 per cent.
The Chittagong Stock Exchange sustained a sharp decline, with its All Shares Price Index (CASPI) shedding 215 points to 16244 and the Selective Categories Index (CSCX) losing 131 points to 9767.
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