Bangladesh’s stock market suffered another significant blow on Tuesday, continuing a volatile trend triggered by regional geopolitical tensions and domestic investor anxiety. The benchmark index of the Dhaka Stock Exchange (DSE), DSEX, fell by 46.98 points to close at 4,874, shedding nearly 1 percent of its value in a single day.
This latest dip comes just days after a brief recovery following a dramatic crash on May 7, when the index plunged by 149 points in the wake of the India-Pakistan conflict. Although a ceasefire mediated by the United States took effect on Saturday, market sentiment has remained largely pessimistic, driven by uncertainty, poor earnings reports, and widespread sell-offs across sectors.
Market Begins with Optimism, Ends with Panic: Trading on Tuesday began on a hopeful note. Within the first four minutes of opening, the DSEX gained 22 points to reach 4,944. Buoyed by minor rallies in banking and insurance shares, the market held steady until noon. However, post-lunch trading saw a sharp reversal as investors began dumping shares amid renewed fear of prolonged volatility.
In the last quarter-hour of trading, the index nosedived by 82 points from the day’s peak, reaching as low as 4,862 points before settling at 4,874 at the close.
According to market analysts, the late-day sell-off indicates a lack of investor confidence despite attempts by the interim government and regulators to stabilize the market.
Massive Decline Across the Board: Of the 360 companies listed on the DSE, 356 were traded on Tuesday. Among them, 272 saw a drop in share prices, only 52 gained, and 32 remained unchanged. The widespread sell pressure spared no segment of the market. Particularly hard-hit were large-cap stocks in the banking and insurance sectors, which had shown signs of recovery just a day earlier.
In addition, 32 of the 37 mutual funds also recorded price losses, with only two funds ending in the green. Analysts say mutual funds-typically seen as a safer bet for small investors-are now losing their appeal due to the continuous erosion of their net asset values (NAV).
Sector-Wise Performance: Red Everywhere: A detailed sectoral analysis reveals that 14 of the 19 sectors experienced a decline ranging from 1 to 3.5 percent. These include banking, financial institutions, pharmaceuticals, engineering, and textiles-the core pillars of DSE’s trading volume.
Sectors such as cement, telecommunications, information technology, travel and leisure, and miscellaneous experienced a relatively moderate decline-less than 1 percent. However, of the 41 companies in these five sectors, 39 were traded, and most recorded negative returns.
Only a handful of stocks in the fuel and power sector and small-cap engineering firms witnessed a minor uptick, mostly driven by speculative buying and short-term repositioning.
The India-Pakistan Conflict: An External Shock: The market’s plunge on May 7-where the DSEX lost 149 points in a single day-was initially attributed to the sudden escalation of hostilities between nuclear-armed neighbors India and Pakistan. While Bangladesh is not directly involved in the conflict, fears of a regional economic slowdown and potential trade disruptions rattled investor nerves.
“Global investors are not just looking at individual markets but assessing the entire South Asian risk profile,” said Shamsur Rahman, a senior portfolio manager at a local asset management firm. “Even though Bangladesh is not party to the conflict, the perception of instability in the region can drive capital flight and increase risk premiums.”
The United States intervened diplomatically, securing a ceasefire between India and Pakistan last Saturday. However, the temporary nature of the truce and the lack of any concrete peace agreement have kept the regional market on edge.
Domestic Issues Undermine Confidence: Beyond geopolitical factors, market insiders argue that the more pressing problems are domestic in nature. These include a deepening liquidity crisis in the banking sector, concerns over rising inflation, weak corporate earnings, and regulatory uncertainty.
On Monday, Chief Advisor to the interim government Professor Dr. Muhammad Yunus held a high-level meeting with finance ministry officials, Bangladesh Securities and Exchange Commission (BSEC), and leaders of the capital market to explore measures to curb the ongoing stock market crisis. Sources say proposals discussed included injecting liquidity, curbing manipulation, and improving disclosure compliance.
Although the market showed a brief recovery on Monday with a 19-point gain, largely driven by speculative buying in banks and insurance stocks, it failed to sustain momentum on Tuesday.
“Retail investors are in panic mode. They don’t care about policy meetings unless they see results on the trading floor,” said Rafiq Hossain, a veteran market analyst. “Until there is a strong institutional push or foreign investment inflow, any uptick will be short-lived.”
No End in Sight for Bearish Trend: The current bearish trend is part of a longer pattern. The DSEX has now fallen more than 700 points over the past three months, wiping out over Tk 70,000 crore in market capitalization. Institutional investors, including insurance companies and banks, have adopted a cautious approach, and foreign investors remain net sellers.
Foreign portfolio investment (FPI) in Bangladesh’s stock market has been declining for six consecutive quarters. Experts attribute this to the dollar shortage, exchange rate uncertainty, and concerns over corporate governance in listed firms.
The lack of initial public offerings (IPOs) from strong companies and the failure to attract quality listings have also weakened market depth. As a result, the DSE remains vulnerable to manipulation and panic-driven trading.
BSEC’s Response Under Scrutiny: The Bangladesh Securities and Exchange Commission (BSEC) has come under increasing pressure to act decisively. Despite forming monitoring cells, issuing compliance notices, and proposing fines against errant companies, critics argue that the regulator has failed to inspire confidence among investors.
“Regulatory inaction or delayed enforcement contributes to this market crisis,” said Nazmul Huda, a finance professor at the University of Dhaka. “Unless the BSEC can clean up junk stocks and enforce proper disclosure, market fundamentals will continue to deteriorate.”
In a recent circular, the BSEC asked brokerage houses to strengthen their surveillance systems and avoid engaging in unauthorized margin lending. However, insiders claim that many brokerage firms continue to offer risky leverage products to small investors, deepening their losses during market downturns.
Retail Investors Bear the Brunt: The biggest casualties of the ongoing market crash are retail investors. Thousands of small investors, many of whom entered the market during the post-COVID recovery phase, are now facing steep losses. Some investors report portfolio losses of over 40 percent since January.
“I borrowed Tk 5 lakh from a cooperative society to invest in bank and textile stocks. Now my portfolio is worth less than Tk 3 lakh,” said Habib Ullah, a small investor from Chattogram. “I don’t know how I will repay the loan.”
Social media platforms and investor forums are flooded with complaints and calls for a bailout. Many are urging the government to consider a market stabilization fund, similar to the one proposed during the 2010 crash, but there has been no official indication of such support yet.
Looking Ahead: What Needs to Be Done: To stabilize the market and rebuild investor confidence, experts have put forward a number of recommendations:
Inject liquidity through institutional support: The Investment Corporation of Bangladesh (ICB) and other government-backed institutions could be tasked to absorb sell pressure and stabilize prices.
Tighten regulatory enforcement: The BSEC must act against companies that violate disclosure norms or engage in manipulation.
Reform IPO process: Streamlining the IPO process and ensuring only financially sound companies get listed can improve market quality.
Encourage foreign investment: Addressing concerns about dollar repatriation and improving corporate governance could help bring back foreign funds.
Launch financial literacy campaigns: Educating retail investors on risk management and portfolio diversification is crucial to prevent panic-driven losses.
The latest drop in the DSE index is a stark reminder that Bangladesh’s stock market remains vulnerable to both external shocks and internal weaknesses. While regional tensions may have been the immediate trigger, deep-seated structural issues-ranging from poor regulatory oversight to investor panic and liquidity shortages-continue to plague the capital market.
Without bold policy interventions and visible reforms, the market may remain trapped in a cycle of volatility and decline. Investors, regulators, and policymakers now face a critical juncture: act swiftly to restore confidence or risk further erosion of public trust in the country’s financial markets.
