Stocks thumb down to budget

Stocks declined in a volatile trade on Sunday, the first session after the national budget for the new fiscal year was announced.

The market opened on a negative note and remained in the red territory throughout the session.

The benchmark DSEX index moved in a range of 70 points, showing an intraday high of 6,476 and a low of 6,421. At close, it was down 48 points or 0.75 per cent at 6,431.

Among other indices, the Shariah-based DSES index shed 10 points or 0.75 per cent to settle at 1,403, while blue-chip comprising the DS30 index fell 17 points or 0.75 per cent at 2,334.

The major sectors taking the index toward south were banks, fuel & power, insurers, ceramics, cement, IT, pharmaceuticals, and textiles.

The most points taken off the index were by Walton High-Tech Industries which stripped the key index of almost 6 points followed by Square Pharmaceuticals with 4 points, Robi with 3.78 points, BATBC with 3 points, BRAC Bank with 1.89 points and Lafarge Holcim Bangladesh 1 point.

The heavyweight Walton dropped almost 1 per cent after Finance Minister Mustafa Kamal proposed to impose 5 per cent VAT on local refrigerator and free makers, dragging down the market, said an analyst.

The sectors taking the index toward north were ceramics, jute and telecommunications.

The most points added to the index were by Grameenphone which contributed almost 5 points followed by Shinepukur Ceramics with 1 point, and Bangladesh Shipping Corporation 1 point.

“The overall focus of the budget is to tame inflation and curb currency swings, which appear as the core concern while accelerating economic growth,” said an analyst at an investment bank.

The budget deficit is expected to increase by 20 per cent where 44 per cent of the deficit will be financed through the banking system, which will put pressure on banks, he added.

The excessive bank borrowing may result in a liquidity squeeze and push up interest rates, he said.

Another analyst said investors' confidence was mainly dampened by the deteriorated current account deficit, which widened $14 billion in the first nine months of the current fiscal year.

“This mainly weighed down on investors’ sentiments,” he said.

Volumes remained low as compared to the last trading session, as traders were very cautious after the post-budget session.

“Dhaka stocks tumbled as investors went for sell-offs since the fear of tighter financial conditions across the globe has unleashed significant volatilities on equities in the country,” said the EBL Securities in a note.

It said, “Market settled down after the record Tk 678 crore fiscal budget as investors are analyzing the potential impacts on the capital market with caution before making any more investments.”

The port city bourse, CSE, however, settled in red terrain. The selected indices (CSCX) and All Share Price Index (CASPI) have declined by 81.1 and 134.4 points respectively.