Stocks saw another massive fall on Monday as panic-stricken investors exerted a selling pressure across the trading floor of the Dhaka Stock Exchange (DSE).
Prolonged bearish trend of the market frustrated general investors while pre-Eid sale pressure coupled with forced selling on marginable securities intensified the index's downward spiral, market experts say.
The prime index of the DSE lost 502 points or 7.93 per cent since the lifting of the floor price on January 18 this year. The market witnessed erosion of Tk 1.05 trillion during the time, with large-cap stocks enduring a sharp decline in value.
High interest rate is one of the major factors behind the recent downturn of the country's stock market, said Prof Abu Ahmed, former chairman of the economics department of the University of Dhaka.
Generally, the market tends to weaken when interest rates rise and funds are diverted to the money market from the capital market, he said.
The annual yield of risk-free Treasury bonds has gone as high as 11 per cent or more while investment income from listed securities is very poor.
"The rising interest rate is discouraging institutional investors to put their funds into stocks," said Prof Ahmed, adding they are diverting funds to risk-free government securities for higher returns.
Big stocks, such as Grameenphone, BAT Bangladesh, Walton, Renata, Robi and United Power witnessed corrections between 11 per cent and 38 per cent after the floor price removal.
Market cap is calculated by multiplying the total number of a company's outstanding shares with the current market price of each share.
The DSE Brokers Association last week held a series of meetings to help revive the market momentum, but failed to boost investor sentiment.
Following the previous day's index plunge, the market opened lower on Monday and the downward trend continued until the end of the session with no sign of reversal amid ongoing pessimism.
DSEX, the prime index of the DSE, finally slid almost 67 points or 1.13 per cent to settle at 5,834.
Price fall of LafargeHolcim, Renata, Beacon Pharma, Beximco Pharma, and BAT Bangladesh dragged the market index down. These five stocks accounted for 29 points of the DSEX fall on Monday.
"The market pulse shifted to correction mode again after a recent short-lived optimism due to waning investor confidence," said EBL Securities.
Market participation remained sluggish, as turnover on the prime bourse came down to Tk 4.56 billion, 21 per cent lower from the day before.
Losers outnumbered gainers, as out of the 393 issues traded, 318 saw correction, 41 witnessed price hike while 34 issues remained unchanged on the DSE floor.
Two other indices also closed lower. The DSE 30 index, comprising blue chips, lost more than 26 points to finish at 2,024 and the DSE Shariah index (DSES) shed 18 points to 1,267.
The newly-listed Asiatic Laboratories became the most-traded shares, with shares worth Tk 320 million changing hands, followed by Central Pharma, LafargeHolcim, Best Holdings, and Golden Son.
Rupali Life Insurance was the day's top gainer, posting a 4.93 per cent rise while LafargeHolcim was the worst loser, losing 7.96 per cent from its record date on Sunday.
The Chittagong Stock Exchange also ended lower with its All Shares Price Index (CASPI) losing 168 points to 16,704 and the Selective Categories Index (CSCX) shedding 102 points to 10,028.
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