The benchmark index of the Dhaka Stock Exchange (DSE) sank to a near four-year low yesterday as large investors continued selling amid fears of further erosion of their investments.

This prompted the stock regulator to form an inquiry committee yesterday. It will look into the recent downtrend of the DSEX, the prime index of the Dhaka bourse, and submit a report to the regulator within 10 working days.  

Meanwhile, insiders and market experts said the intense political landscape and recent policy rate hike, along with lower-than-expected earnings disclosures of companies, played a catalytic role in the sharp decline.

This dampened investment sentiment and discouraged investors from pouring fresh funds into shares amid price fluctuations.

A huge forced sell also worsened the situation while buying appetite is low as investors cannot determine the bottom of the market fall.

Investors currently do not have any confidence in the market, said Saiful Islam, president of the DSE Brokers Association of Bangladesh.

As the second reason, he identified trigger sales or margin calls.

"The margin calls are not stopping. What we can do is restore investor confidence in the market," he said. "To regain it, we need leadership."

"Lenders can't go for the margin call. What we can do is restore the confidence of investors in the market, where leadership can play a vital role," he said.

A margin call is a demand made by a broker for an investor to deposit additional funds into their margin account. If the investor fails to do so, brokerage firms or the merchant bank then go for the forced sale.

The DSEX, the broad index of the country's primary bourse, plunged by 149.20 points, or 2.92 percent, to close at 4,965, the lowest in about four years.

The last time the DSEX had reached such a level was on December 2, 2020, when it stood at 4,934 points.

The other two indices of the DSE also showed negative performance. The DSES index for Shariah-compliant companies slumped by 36.28 points, or 3.17 percent, to 1,107 points and the DS30 index representing blue-chip firms dropped by 48.18 points, or 2.56 percent, to 1,830 points.

The day's turnover stood at Tk 304 crore, a decrease of 0.72 percent compared to the previous day's trading session. The banking sector dominated the turnover chart, accounting for 20.56 percent of the total.

Preferring anonymity, a top official of a stock brokerage said, "The market is falling as investors find that anybody who cares about the market is not in the government."

"So, buyers are rare in the market. On top of that, the fall is triggering forced sales for those who invested in stocks by taking margin loans."

The official said people who are now losing funds will not return to the market. Consequently, it would be more devastating for the market, he added.

For the recent fall, he blamed large investors for selling shares.

Islami Bank Bangladesh alone was liable for 17.76 points of the market decline. Renata, BAT Bangladesh and Square Pharmaceuticals compounded the woes with combined losses of more than 24 points.

Grameenphone, United Commercial Bank, Olympic Industries, Beximco Pharmaceuticals, IFIC Bank and National Bank also suffered losses.

At Chittagong Stock Exchange, the Caspi, the main index of the port city bourse, edged down by 295.99 points, or 2.07 percent, to settle at 14,006 points.