Adding to the situation, S&P, the global credit rating agency, downgraded Bangladesh's rating amid persistent pressure on the external accounts against the backdrop of street violence over students' protests against quota in government jobs. That eroded investors' confidence further in the equity market.
Market experts said most investors shied away from the market.
Meanwhile, the government announced that trading on the bourses will follow the usual timing from today -- 10:00am to 2:30pm, including 10 minutes' post-closing time in line with the banking hours.
The US-based credit rating agency lowered its long-term sovereign rating for Bangladesh to B+ from BB-, according to a report published on its website on Tuesday.
The downgrade comes at a time when protests and clashes between students, police and Chhatra League men led to the death of at least 163 people and massive destruction of public property.
The 'B+' ratings reflect the country's modest per capita income and limited fiscal flexibility owing to a combination of low revenue-generation capacity and high interest burden.
Bangladesh's external liquidity is weakening, as indicated by sustained depletion of its official foreign exchange reserves, said the global rating agency.
External pressure particularly stemmed from the continued decline in foreign exchange reserves. This has occurred despite import contraction through measures taken by the central bank and a smaller current account deficit.
Amid growing tension regarding the market's outlook, investors went on panic sell-offs of major stocks right from the start of the trading session, with no sign of reversal.
Substantial price erosion of large-cap stocks, including blue chips, dragged the benchmark index of the Dhaka Stock Exchange (DSE) by almost 61 points or 1.13 percent to five-week low of 5,269. The DSEX shed 144 points in the past three trading days.
As large stocks kept sliding, the market cap of the DSE, calculated by multiplying the total number of outstanding shares with the current market prices, lost Tk 97 billion in the three trading days to Tuesday.
The biggest blow is that foreign investors' confidence has been dented as economic activities and internet speed are yet to regain normality, said Md Shakil Rizvi, managing director of Shakil Rizvi Stock Ltd.
However, he expressed the hope that the market will rebound as all public and private offices will run operations as per their normal timing from today (Wednesday).
The blue chip stocks faced a sharp fall, as investors feared further corrections.
Price erosion of Renata, Square Pharma, Beximco Pharma, Beacon Pharma and Grameenphone largely contributed to the market plunge on Tuesday. They jointly accounted for one-fourth of the index decline.
Subsequently, the blue chip index DS30, a group of 30 prominent companies, lost almost 21 points to 1,882 while the DSES Index, which represents Shariah-based companies, shed 15 points to 1,151.
Most of the investors went on a selling spree to protect their funds as uncertainties remained persistent centering on the anti-quota protest, according to EBL Securities.
Investors' participation remained low. Turnover came down to Tk 4.33 billion, 4 per cent down over the day before.
The pharmaceutical sector kept its dominance in the turnover chart, accounting for 39 per cent of the turnover, followed by food and banking sectors.
All sectors faced selling pressure, leading to price erosion of more than 86 per cent stocks. Out of the 397 issues traded, 340 declined, 25 advanced and 32 remained unchanged.
Among the major sectors, financial institutions took a big hit, losing 2.55 per cent, followed by engineering 2.3 per cent, power 1.46 per cent, banking 0.75 per cent and telecom 0.72 per cent.
Newly-listed Techno Drugs became the most-traded stocks, with shares worth Tk 837 million changing hands, capturing 19.4 per cent of the total turnover, followed by Orion Infusion, Agni Systems, Alif Industries, and NRB Bank.
Techno Drugs was also the top gainer, rising 9.98 per cent, while Padma Life Insurance was the worst loser, enduring 10.25 per cent correction after its announcement of no dividends for 2023.
The Chittagong Stock Exchange also ended sharply lower, with its All Shares Price Index (CASPI) shedding 132 points to 15,141 and the Selective Categories Index (CSCX) losing 80 points to 9,121.
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