The daily turnover on the Dhaka bourse tumbled 38 per cent to go below Tk 5 billion on Thursday, as investors continued to show reluctance in investing in stocks amid growing political tension.
The market has remained bearish for more than a year since the stock market regulator imposed floor prices, with some periodic upward movements that failed to sustain.
The latest policy rate hike by a further 50 basis points amid a tightened monetary space exacerbated the situation. That compelled investors to focus on short-term bets, with their confidence in the market almost exhausted.
Turnover, a crucial indicator of the market, stood at Tk 4.81 billion on Thursday on the country's premier bourse, down from the previous day's value of Tk 7.70 billion.
The recent approval of the second tranche of the International Monetary Fund (IMF) loan has failed to inflame interest about the market.
The IMF on Tuesday approved the release of $689 million in the second tranche of the $4.7 billion loan package allocated for Bangladesh.
The Washington-based lender advised Bangladesh to continue to focus on containing inflation and rebuilding external resilience.
Analysts say the prevailing floor price discourages investors from putting money in stocks. Uncertain economic outlook may be another reason as to why fresh investments are not coming in.
A lack of institutional buyers coupled with the price restriction is preventing buy-sell of shares, which is a major reason for low turnover for a long time.
According to EBL Securities, the overall investor sentiment remained subdued; cautious investors engaged in profit-booking sell-offs owing to shaky confidence across the trading floor.
"While a section of opportunist investors chased quick rallies in particular stocks, the risk-averse investors engaged in profit-booking sell-offs on recently rallied stocks, making the market volatile."
The ongoing depressed market situation, liquidity crunch, and the absence of institutional investors altogether eroded investors' confidence, said Prof Abu Ahmed, a former chairman of the economics department of the University of Dhaka.
The recent rise in interest rates hurt investors' sentiment, he said.
The rumour-driven junk stocks, such as Prime Finance First Mutual Fund, Shyampur Sugar Mills, Khan Brothers PP Woven Bag Industries Ltd, Pacific Denims, Union Capital, and Aziz Pipes, kept rising without any reason for investors to be willing to bet on the stocks.
These stocks surged between 7.6 per cent and 10 cent on Thursday.
As a result, the benchmark index of the Dhaka Stock Exchange advanced 3.98 points to 6,266, after losing 1 point the day before.
The DS30 Index, which consists of blue-chip companies, advanced nearly 2 points to 2,107, while the DSES index, which represents Shariah-based companies, rose 1.64 points to 1,366.
The large-cap stocks, which dominated the market earlier, remained unmoved due to limited liquidation opportunities, making investors reluctant to inject fresh funds.
Small-cap stocks continued to dominate the turnover list. Olympic Accessories became the most-traded stocks, with shares worth Tk 300 million changing hands, closely followed by Pacific Denims, Orion Infusions, Central Pharma, and Khulna Printing & Packaging.
Prime Finance First Mutual Fund was the day's top gainer, soaring 10 per cent while Ambee Pharma was the worst loser, shedding 5.46 per cent.
A majority of the traded stocks remained unchanged as out of the issues traded, 164 remained unchanged while 111 issues saw price erosion and 63 closed higher on the DSE trading floor.
The Chittagong Stock Exchange (CSE) also edged up with its All Share Price Index (CASPI) rising 15 points to settle at 18,583 and the Selective Categories Index (CSCX) gaining 9 points to close at 1,113.
The port city's bourse traded 4.99 million shares and mutual fund units with a turnover volume of nearly Tk 108 million.
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