Stocks closed this week lower, snapping an eight-week winning streak, as cautious investors rushed to book profits in quick-gaining stocks, particularly in the banking and blue-chip sectors.
Market analysts attributed the correction to a wave of profit-taking after significant gains in recent weeks.
Most bank stocks that rallied over 20 per cent in the past month saw sharp pullbacks. SBAC Bank, for example, soared 30 per cent during the month before shedding 9 per cent this week, making it the third-biggest loser of the week.
Some banks have reported massive losses in the January-June period, as their defaulted loans escalated after political changeover. Analysts believe the undisclosed non-performing loans under the previous government are now surfacing, further eroding investor confidence in the sector.
This week, the banking sector experienced the highest loss of 3.54 per cent among the major sectors with four banks -- SBAC Bank, Trust Bank, City Bank and Dhaka Bank - featuring in the weekly top loser chart.
Despite the weekly slide, the broader market had recently seen strong upward momentum. The benchmark index of the Dhaka Stock Exchange had gained around 805 points over the past eight weeks, driven by improved macroeconomic indicators, while market capitalisation rose by Tk 617 billion.
"The momentum traders, who had taken positions in the banks stocks, booked their desired gain, leading to the index down," said Akramul Alam, head of research at Royal Capital. That, according to Mr Alam, was a positive thing because when investors make profits they get confidence to invest more.
Moreover, the declining yield rates of government securities, improvement in the macroeconomic situation and the favourable outcome from tariff negotiations with the US might have given a boost to investor confidence, he added.
The market opened this week with a bullish tone, buoyed by optimism over US tariff negotiations and surpassing the 5,500 mark for the first time in 10 months. However, the rally lost steam midweek as a sell-off triggered by profit-taking overtook investor sentiment.
The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), finally slid more than 35 points or 0.65 per cent to 5,408.
EBL Securities, in its weekly analysis, said, "Despite regulatory efforts to enlist 15 state-owned and multinational companies alongside clarification regarding the probable timeline for the upcoming national election, investor positive sentiment has yet to be stimulated."
Bank stocks took a big hit and BRAC Bank, City Bank, Eastern Bank, Prime Bank and Al-Arafah Islami Bank largely contributed to the weekly index fall, as they jointly accounted for around 30-point fall of the DSEX.
The DS30 index, a group of 30 prominent companies, shed nearly 17 points to 2,097 while the DSES Index, which represents Shariah-based companies, saw a fractional loss of 0.18 point to close at 1,170 points.
On the bright side, investors were active in the market as the market turnover remained high and the total turnover stood at Tk 36.45 billion, as against Tk 41.94 billion in the week before. This week saw four trading days instead of regular five days because of a public holiday.
Accordingly, the average daily turnover stood at Tk 9.11 billion, around 9 per cent up from the previous week's figure of Tk 8.39 billion.
The banking sector, however, kept its dominance in the weekly turnover chart, accounting for 26.6 per cent of the week's total turnover, followed by the pharma sector (12.5 per cent) and textile sector (9.8 per cent).
Losers took a strong lead over gainers, as out of the 395 issues traded, 227 ended lower, 138 closed higher and 30 remained unchanged on the Dhaka bourse.
Apart from banking sector, non-bank financial institutions, food, general insurance and cement sectors also saw losses while textile, telecom and pharmaceuticals managed to close in the green territory.
Bangladesh Shipping Corporation became the most-traded stock, with shares worth Tk 1.4 billion changing hands, closely followed by City Bank, Jamuna Bank, Uttara Bank and BRAC Bank.
The Chittagong Stock Exchange also followed suit, with its All Shares Price Index (CASPI) shedding 9 points to 15,193, while the Selective Categories Index (CSCX) lost 8 points to 9,317.
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