DSEX downtrend as average stocks sold off

The opening enthusiasm in the stock market did not last up to the end of the Sunday session. 

As the average scrips suffered a selloff following the recent hikes, the broad-based index closed down after eight consecutive sessions in a rally.

Besides, the profit booking in certain large-cap stocks, such as Square Pharmaceuticals, Beximco Pharmaceuticals, LafargeHolcim Bangladesh, and Submarine Cable Company, accelerated the fall in indices.

DSEX, the broad-based index of the Dhaka Stock Exchange (DSE) jump-started the day to hit the intraday peak of 7,334 points at 11 am.

The market, gradually leaning to fundamentally sound scrips from low and mid-cap items, however, nosedived from there and kept falling till the end at 2.30 pm.

DSEX closed at 7,202 which was 0.78% or 57 points lower from the previous close, but a massive 132 points intraday fall.  

Red was dominating the trading boards for most of the scrips other than life insurers, and some multinational companies. 

In the end, only 81 scrips advanced against a decline of 261 while the price of 32 remained unchanged.

The life insurance sector gained on the back of the news of the recent regulatory initiative to make all the industries and factories adopt group insurance.

Multinational scrips which witnessed price appreciation last week closed in the green as an increased number of investors are focusing there, said stockbrokers.

Haircare market leader Marico Bangladesh, Horlicks seller Unilever Consumer, Electronics giant Singer, toiletries manufacturer Reckitt Benckiser, paint giant Berger, telecom operator Grameenphone closed higher to save the day for the indices.  

Of the multinationals listed in the DSE, only Bata Shoe Bangladesh ended in red on Sunday as it had gained by more than 50% over the last four weeks.

Blue-chip index DS30 fell by 0.34% to close at 2,638, while Shariah index DSES suffered the maximum fall of 1.02%.

The direction dilemma

Stock investors were discussing the market direction as soon as the DSEX crossed the psychologically important 7,000-mark last week, which was a record high for the index launched in 2013, but still lower than its predecessor broad index DGEN's 2010 peak of 9,000 points.

Cautious notes by market experts were including the recent sharp rallies across the board, mostly lacking a healthy behaviour of correcting and advancing, while fundamentally weaker scrips' domination was also criticised.  

Bulls' enthusiasm, however, coupled with the securities regulator's outlook and supportive measures defied the Bangladesh Bank's recent cautious stances regarding the stock market rally.

In a recent interview with the state news agency BSS, the Bangladesh Securities and Exchange Commission (BSEC) Chairman Professor Shibli Rubayat Ul Islam reinforced his optimism that the market would be able to sustain its upward trend. 

DSEX gained over 21% in 2020 and more than 33% this year as stocks sharply rose on the better than expected macro-economic performance amid the pandemic, and also the interest rates which dropped dramatically with the monetary easing.

The sharp rise in the indices and a bunch of scrips did not intimidate a large group of analysts and investors about the market as a whole as the market's average price to earnings ratio is yet to reach too high that should trigger a crash like that in 2010.

However, amid the selloff, the total turnover in the DSE increased by 0.44% on Sunday and stood at Tk2,708 crore.

The pharmaceutical & chemical sector contributed to a maximum of 12.12% of the daily turnover, while the engineering and textile sector followed drug makers with over 10% turnover contribution separately.

Life insurers gaining 3.8% market capitalization was countered by ceramic, travel and paper sectors 4.4%, 4.1%, and 3.6% decline in market capitalization respectively.

The port city bourse Chittagong Stock Exchange also ended up in the red terrain. Its broad index CSCX, was down by 84.4 points to close at 12,598, while turnover there was around 15% up.