The stock market stayed upbeat on Tuesday effectively absorbing the floor price withdrawal shock, as buoyant investors injected fresh funds into fundamentally strong stocks.
The exuberance was centred mostly on BRAC Bank, Square Pharmaceuticals, Reckitt Benckiser, Marico, and Unilever Consumer Care, the companies that had remained stuck on the floor for a long time for a lack of buyers.
The removal of the price restriction seems to have put renewed energy into the stocks. BRAC Bank began rising on Sunday after 14 months from the minimum price level withdrawn on Thursday last week. It continued its upward movement on the DSE on Tuesday, climbing 4.70 per cent further to Tk 37.9 per share.
Similarly, Square Pharma, which is considered one of the best performing blue-chip stocks, increased nearly 2 per cent to Tk 221.5 a share on Tuesday.
Explaining the sudden buying appetite in these stocks, Ashequr Rahman, managing director of Midway Securities, said investors had feared the illiquidity of the securities with the floor price in place.
"People were worried if they purchased Square Pharma in the presence of floor price, they might not be able to sell shares. Now, they are not worried. Now, people are investing in Square Pharma because they know the stock is undervalued," he added.
The market turnover exceeded Tk 10 billion-mark for two sessions in a row, including Tuesday, while the prime index of the Dhaka bourse recovered 36 points during the time after losing 96 points on the first day without the price restriction.
The recovery is partly attributed to the supportive role being played by market intermediaries, including the state-run Investment Corporation of Bangladesh.
Md Sayadur Rahman, former president of the Bangladesh Merchant Bankers Association (BMBA), said institutional investors became active again and that they would continue investing in the market.
The post-polls political stability, floor price withdrawal, and economic pressure easing up encouraged institutional investors to return to the market. "Others, who were on the sideline, are coming back too," added Mr Rahman.
Tuesday's market rally was also supported by bank stocks, which altogether gained 2.6 per cent in terms of market value. Out of 35 banks, 31 surged on the DSE. The banking sector accounted for 13.2 per cent of the day's market turnover.
Institutional support has staved off the much-anticipated sell pressure after the regulatory move. The fear was there because of the absence of price discovery for as long as 18 months due to floor price.
Many apprehended that the marginable securities would come under a mounting pressure of forced selling after the removal of the floor in brokers' efforts to adjust margin loans.
"But many stocks traded above the level of margin call, which saved many borrowers from selling pressure," said a leading broker, requesting not to be named.
Mr Rahman, former president of the BMBA, acknowledged that they were supporting the market from the front.
Before the lifting of the floor prices, the Bangladesh Securities and Exchange Commission (BSEC) held a series of meetings with market stakeholders and urged them not to create a selling pressure.
The chief executive officer forum promised at the time to extend its support by investing Tk 10 million in each of their portfolios.
Meanwhile, the BSEC lifted the floor price from 23 more companies on Monday, prompted by market recovery. Twelve big index movers are now left with the restriction on them.
According to Mr Ashequr Rahman, of Midway Securities, general investors also put fresh bets on stocks, especially good stocks, supporting their rise on the bourse.
Amid all the signs upholding optimism, one thing that seems worrisome is the persistent abnormal rally of a handful of junk stocks.
Market insiders point out manipulation, insider trading, and flaws in audited financial accounts as being responsible for that. One more thing is to get fixed - the weakness in regulatory monitoring.
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