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Panic, inactivity expediting capital market decline

Shakhawat Hossain Sumon
18 Apr 2024 21:21:59 | Update: 18 Apr 2024 21:35:35
Panic, inactivity expediting capital market decline

The fall in stock market indices has continued for the last four working days. The decline that started on April 15 has continued until April 18. Last Thursday, the main index DSEX tumbled below the 5,700 mark after three years.

According to statistics, the main index of Dhaka Stock Exchange (DSE) lost 177.39 points in the last four days. During this period, the highest index fall was on April 15 at 85.31 points.

Curiously, the previous four working days had seen a chain of rising indices, hitting 125.69 points.

Although there is no clear reason for such a fall in the index, market insiders say the first week after Eid has passed. Investors are still not focused on the transaction. But the transaction will be normal starting next week.

However, market investors say that institutional investors are not active at this time, and the possibility of an Iran-Israel war has had a negative impact on trading. The fallout from the earlier Russia-Ukraine war is still affecting many companies’ profits.

They say, apart from this, the fragile state of the financial sector within the country is also affecting capital market transactions. In particular, the initiative to merge weak banks with strong banks has also hit the capital market.

So far, five private sector banks have decided to merge, including Exim Bank, City Bank, UCB, National Bank, and Padma Bank. All of them except Padma Bank are listed on the capital market.

According to data on the DSE website, a total of 70 working days have been traded since the beginning of 2024 until April 18. Of these, 38 working days have seen the index decline and Increased by 32 working days.

DSE's flagship index, DSEX, fell by 1464.49 points in 38 working days. And in 32 working days, the index rose by 904.68 points.

Index decline statistics show that 13 out of 38 working days saw the index fall by more than 50 points. The index fell by 925 points in these 13 working days. The biggest fall in the index was on January 21, by 96.50 points.

And the biggest rise in the 32-day index was on February 11 at 73.71 points. During this time, the index rose more than 50 points in 7 working days.

Capital market analyst Debbrata Kumar Sarkar said, “Many times in the capital market, the index continuously falls and rises. There is nothing to fear. But in many cases, global conditions directly affect capital markets.

“This applies not only to our capital market but to all capital markets in the world.”

He added, “A lack of active institutional investors is one of the many reasons behind the sharp fall in the capital market. Besides, our investors trade more on rumors. As a result, if any issue suddenly occurs in the capital market, investors withdraw from making new investments.

“This caused a further decline in the capital market.”

Capital market analyst Abu Ahmed said, along with the initiative to consolidate banks, the Iran-Israel war is scaring investors. Falling stock market indices are now becoming regular. Now if the index rises for two days, the index falls for four days.

“As a result, it is very difficult to make a profit by investing in such a market.”

He added, “Regulatory bodies should also take responsibility in this regard to see why the index fell in such a way. If investors do not have confidence in the capital market, no one will make new investments.”

On Thursday, DSEX – the prime index of the Dhaka Stock Exchange (DSE) – went down by 77.08 points or 1.34 per cent to 5,686.69.

Two other indices also ended sharply lower with the DSE 30 Index, comprising blue chips, plunged 22.77 points to finish at 1,984.57 and the DSE Shariah Index (DSES) lost 15.86 points to close at 1,246.56.

However, the turnover, a crucial indicator of the market, increased to 522.51 crore, which was 482.53 crore at the previous session of the week. Out of 395 issues traded, 342 declined, 30 advanced and 23 remained unchanged on the DSE trading floor.

In its daily market review, EBL Securities said the market observed a downward trend throughout the session, caused by the predominant selling pressure across the trading floor since jittery investors are rattled by the rising tensions over the Middle-East geopolitical crisis and its probable economic impacts that can potentially affect the market outlook.

Moreover, the market has been wading through a prolonged downbeat vibe, and such subdued market sentiment has yet to rebound until there are significant catalysts to counter the prevailing pessimism pervading across the trading floor.

On Thursday, Pharma exerted the highest turnover at 19.5 per cent, followed by Textile 13.3 per cent and Food 12.0 per cent.

Almost all the sectors displayed dismal returns, out of which Financial Institutions 3.4 per cent, Paper 3.1 per cent and Mutual Funds 2.5 per cent per cent exerted the most corrections on the bourse, while only Travel 1.6 per cent exhibited slight positive returns.

The Chittagong Stock Exchange (CSE) also ended sharply lower with the CSE All Share Price Index - CASPI -losing 215.02 points to settle at 16,244.52 and the Selective Categories Index - CSCX shedding 130.91 points to close at 9,766.83.

Of the issues traded, 157 declined, 36 advanced and 18 issues remained unchanged on the CSE.

The port city's bourse traded 49.72 lakh shares and mutual fund units with turnover value worth about Tk 18.06 crore.