Mutual funds steal the show as DSE extends winning streak to fourth month
Regulatory reforms, strong corporate earnings and monetary easing boost investor confidence, helping Bangladesh outperform several regional markets.
The Dhaka Stock Exchange (DSE) extended its winning streak for a fourth consecutive month in July, driven by a spectacular rally in mutual funds, encouraging corporate earnings and a series of market-friendly policy initiatives that strengthened investor confidence.
The benchmark DSEX index gained 132 points, or 2.3%, to close at 5,895, according to Sheltech Brokerage Limited's monthly market review. The blue-chip DS30 index rose 1.78% to 2,217, while the Shariah-based DSES advanced 2.32% to 1,195.
Market participation also improved. Average daily turnover increased 4.03% month-on-month to Tk1,254 crore, while average daily trading volume rose 9.57% to 425.5 million shares.
Mutual funds lead rally
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Mutual funds emerged as the top-performing sector in July, with market capitalisation surging nearly 22% - the highest among all sectors.
Sheltech Brokerage attributed the rally to growing optimism over government plans to reform the long-neglected mutual fund industry. Investors accumulated fund units in anticipation of measures aimed at improving institutional participation and long-term valuations.
Trading activity reflected the enthusiasm. Average daily turnover in the sector jumped 189% month-on-month to Tk42.87 crore.
Among listed securities, EXIM Bank First Mutual Fund topped the gainers with a 91.43% rise to Tk6.70, while MBL First Mutual Fund climbed 87.8% to Tk7.70. NCCBL Mutual Fund One advanced 65.91% and PF First Mutual Fund gained 62.5%.
Analysts said the rally was further supported by the FY27 budget, which removed the Tk5 lakh investment ceiling previously required to qualify for tax rebates.
Broad-based gains
The rally extended beyond mutual funds. Textile stocks posted the second-highest sectoral gain at 10.81%, followed by food and allied (7.46%), jute (6.34%), travel and leisure (6.10%), tannery (5.92%) and non-bank financial institutions (5.68%).
Textiles also dominated trading, accounting for 17.48% of total market turnover, followed by insurance (14.28%) and pharmaceuticals and chemicals (11.44%).
Analysts said the broad participation suggested improving investor sentiment rather than speculative buying in a few sectors.
Outperforming regional peers
Bangladesh's stock market outperformed several regional peers despite geopolitical tensions and global market uncertainty.
Among South and Southeast Asian markets, only Indonesia and Malaysia posted stronger monthly gains. Indonesia's IDX Composite rose 10.51% and Malaysia's FTSE Bursa Malaysia KLCI gained 3.66%.
Bangladesh outperformed India's Sensex, which rose 2.11%, and Thailand's SET Index, up 2.04%. Meanwhile, Pakistan's KSE-100 Index fell 2.33%, Sri Lanka's All Share Price Index dropped 5.09% and Vietnam's VN-Index declined 6.68%.
Sheltech Brokerage said Bangladesh's comparatively strong performance reflected improving domestic sentiment fuelled by regulatory reforms and stronger-than-expected corporate earnings.
Reforms and easing support market
Investor confidence strengthened after the government unveiled a 17-point roadmap to develop the capital market.
The announcements briefly lifted the DSEX to 5,926.28 points – its highest level in nearly two years – while daily turnover reached a two-year high of Tk1,669 crore.
The roadmap includes faster settlement systems, digitalisation of trading, expansion of the bond market, AI-based market surveillance and measures to attract institutional investors.
Support also came from Bangladesh Bank, which cut the policy interest rate by 50 basis points, signalling the start of monetary easing to support investment and economic recovery.
Government security yields also declined as banking system liquidity improved. Lower interest rates generally make equities more attractive by reducing financing costs and encouraging investors to shift from fixed-income assets.
Earnings remain encouraging
Corporate earnings also reinforced optimism. Of the 89 listed companies that disclosed April-June results during the month, 65 reported year-on-year growth in earnings per share.
Banks and non-bank financial institutions were among the strongest performers, benefiting from higher income from investments in government securities despite subdued lending. Several multinational companies also reported solid earnings, sustaining demand for blue-chip stocks.
Sheltech Brokerage said the results indicated that many listed companies were adapting to the challenging macroeconomic environment through cost control, operational efficiency and stronger treasury income.
Focus shifts to next reforms
Investors are now watching the finalisation of the revised margin lending framework, which is expected to influence market liquidity. They are also awaiting dividend declarations and annual financial statements from June-closing companies.
According to Sheltech Brokerage, continued implementation of market reforms, supportive monetary policy and stable corporate earnings could help sustain the market's positive momentum despite lingering global and domestic economic risks.
