Stocks nosedive amid interest rate worries

Indices plummeted on Wednesday as investors, worried about a potential interest rate hike, were aggressively engaged in selling off stocks to dodge massive corrections.

At the end of the session, DSEX, the broad-based index of the Dhaka Stock Exchange (DSE), fell by 1.1% to 6,591 points, while more than eight in every ten listed scrips declined.

Analysts blamed the fear of an interest rate hike amid surging inflation that might hurt the inflow of funds into stocks.

They said if inflation rises further, banks would be forced to increase their deposit rates. But for maintaining a decent spread, they might also have to increase their lending rates with the Bangladesh Bank raising the unconventional cap on commercial banks' lending rate from the existing 9%.

"Amid the global economic turmoil owing to volatility in the commodities market and price increases on essentials, most investors adopted a conservative approach and favoured selling off stocks to avoid any considerable correction," said EBL Securities in their market commentary.

Stockbrokers said a large number of stocks had gained in the previous two weeks from their respective swing lows but investors, on Wednesday, barely showed any appetite to hold them.   

However, the blue-chip index DS30 had a lesser fall of 0.62% to 2,420, as the large-cap stocks declined fewer thanks to their gains in the recent short-lived rally.

No sector except miscellaneous managed to avert the decline in their respective market capitalisations.  

Turnover in the DSE declined by 9.7% to Tk1,136 crore on Wednesday which was Tk1,258 crore on Tuesday.

The Chittagong Stock Exchange (CSE) also observed a similar situation as all its indices nosedived on Wednesday.  

CSCX, the broad-based index there, closed 119 points lower at 11,599, while turnover in the port city bourse dropped below Tk26 crore from Tk47.5 crore in the previous session.