Stocks fall ahead of monetary policy announcement

Stocks continued to fall for a second consecutive day yesterday as investors remained cautious ahead of the announcement of the monetary policy for the current fiscal year scheduled for tomorrow.

The DSEX, the benchmark index of the Dhaka Stock Exchange (DSE), dropped 24 points, or 0.38 per cent, to 6,379.67.

The stock market normally turns volatile ahead of the monetary policy's announcement as people worry about its impact, said a merchant banker.

This time their concerns grew because Bangladesh Bank on Sunday directed scheduled banks to prevent stimulus funds from being channelled into the stock market, he said.

If the central bank takes a tough stance in the policy on stock market investments of banks, it will have a negative impact on the market and so investors are waiting to see the plans first, he said.

On the other hand, some investors are taking in their profits as many stocks advanced 8 per cent to 10 per cent during the last two weeks, he added.

"So, these reasons in combination caused the drop," said the merchant banker.

Hopefully, the monetary policy will be expansionary again considering the second wave of the pandemic, for which the stock market will be benefited, he added.

Bangladesh Bank will announce the monetary plan for the next one year delineating money supply and credit growth plans.

There is a correlation between the monetary policy and stock market, so one has an impact on the other, said a stock broker.

Investors are apprehending that the central bank could squeeze the scope for banks to invest in the stock market, so the market fell, he said. As the market index crossed its historical level last week, so people are cautious about investing further because they think the market can undergo a correction at any time, said the broker.

"I think investors should not be fearful if they hold fundamental stocks," he added.

At the DSE, 153 stocks advanced, 194 declined and 26 remained unchanged.

Turnover, another important indicator of the market, went up 2 per cent to Tk 1,462 crore yesterday.

Peoples Insurance Company topped the gainers' list, rising 9.91 per cent, followed by Safko Spinning Mills, eGeneration, Global Heavy Chemicals and Beach Hatchery.

Stocks of Saif Powertec traded the most, worth Tk 64 crore, followed by Baraka Patenga Power, Beximco, GPH Ispat and British American Tobacco Bangladesh.

Tamijuddin Textile Mills shed the most, falling 7.41 per cent, followed by Baraka Patenga Power, Fu Wang Foods, Popular Life Insurance Company and Active Fine Chemicals.

The port city bourse also rose yesterday. The CASPI, the general index of Chittagong Stock Exchange, advanced 83 points, or 0.45 per cent, to 18,532.

Among 309 stocks to undergo trade, 114 advanced, 163 dropped and 32 remained unchanged.