Profit-taking drags market lower as investors turn cautious ahead of earnings season

The stock market extended its losing streak for a second consecutive week, as investors opted for short-term profit-taking and adopted a more cautious stance ahead of the upcoming earnings season.

Market analysts said prices of major sector stocks, many of which were on a gaining streak during the recent market rallies, continued to decline this week, dragging the benchmark equity index down.

This week, the market opened on a weak note, with profit-taking dominating sentiment and triggering a sell-off that persisted through the first four sessions. Only the final session managed to close higher, showing a sign of reversal.

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), finally settled the week 58 points or 1.07 per cent lower at 5,350 points.

The prime index lost a total of 93 points in the past two consecutive weeks while market-cap shed Tk 57 billion during the period, reaching Tk 7.12 trillion at the end of this week.

Prior to the two-week correction, the index had gained around 805 points over eight straight weeks, during which market capitalisation surged by Tk 617 billion. This sharp rally prompted cautious investors to book profits.

The profit-taking pressure coupled with a cautious sentiment ahead of upcoming corporate earnings disclosures contributed to the market decline, said a stockbroker, requesting anonymity.

However, he added, the market may rebound in the near term as the macroeconomic outlook is improving while yield rates on government securities have been trending downward in recent weeks.

Some investors had shown renewed appetite for select June-ending stocks in the final trading session of the week, he added.

EBL Securities, in its weekly analysis, said stocks extended their correction for the second consecutive week as investors preferred to continue short-term profit-booking.

Price fall of Square Pharma, Grameenphone, Islami Bank, Pubali Bank, Social Islami Bank, BSRM and Al-Arafah Islami Bank largely contributed to the weekly index fall, as they jointly accounted for around 30-point decline in the DSEX.

The DS30 index, a group of 30 prominent companies, shed nearly 24 points to 2,074 while the DSES Index, which represents Shariah-based companies, lost 7 points to close at 1,163 points.

Market participation remained subdued as the total turnover stood at Tk 34.46 billion as against Tk 36.46 billion in the previous week. This week saw five trading days instead of previous week's four days.

Accordingly, the average daily turnover dropped to Tk 6.89 billion, down 24 per cent from than the previous week's average turnover of Tk 9.11 billion.

The banking sector kept its dominance in the week's turnover chart, accounting for 24.4 per cent of the week's total turnover, followed by the pharma sector (15.6 per cent) and textile sector (12.1 per cent).

Losers took a strong lead over gainers, as out of the 396 issues traded, 274 ended lower, 99 closed higher and 23 remained unchanged on the Dhaka bourse.

Telecommunication sector experienced the highest loss of 2.6 per cent, followed by the banking sector with 1.6 per cent, non-bank financial institutions (1.5 per cent), food (1.10 per cent), power (0.9 per cent), pharmaceuticals (0.77 per cent) and engineering (0.45 per cent).

Orion Infusion became the most-traded stock, with shares worth Tk 2.13 billion changing hands, closely followed by Bangladesh Shipping Corporation, City Bank, BRAC Bank and Malek Spinning Mills.

The Chittagong Stock Exchange also followed suit, with its All Shares Price Index (CASPI) shedding 221 points to 14,972, while the Selective Categories Index (CSCX) lost 126 points to 9,190.

The port-city bourse traded 21.12 million shares and mutual fund units, with a turnover value of Tk 758 million this week.

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