Shares on the Dhaka Stock Exchange suffered the sharpest daily fall in more than five months yesterday in a reaction to the central bank's latest punitive action against the overexposed banks.

The key index of the prime bourse fell 76.60 points, or 1.23 percent, to close at 6,128 because of a heavy selling pressure from retail investors. It was the steepest single day slide since April 23 when the DSEX shed 83 points. 

Daily turnover declined 8.19 percent to Tk 967 crore, which was Tk 1,054 crore in the previous session. Last week, the central bank came heavily upon the banking sector for violating stock rules.

Seven banks were fined for overexposure to the stockmarket and eight banks are now under investigation. Five more banks could also face the music. The action became known after a number of media outlets ran reports on it yesterday.

“The market reacted negatively to the central bank's action against the overexposed banks,” said Prof Abu Ahmed, a noted economist.

He said the prices of the banking shares went up thanks to the fresh funds injected by banks.

“How long the price index remains downward will depend on the next move of the BB. So, investors will have to be cautious in the next few sessions.”

Md Sayedur Rahman, president of the Bangladesh Merchant Bankers Association, said the central bank's move put negative impact on investors' psychology.

He said the market may face sell pressure further as banks would have to reduce their exposure to remain within the permissible limit.

“Buyers will now adopt a wait-and-see approach and will be interested to buy low-priced shares.”

According to Rahman, the BB might have taken the measures against the overexposed banks in a moderate way instead of aggressively to avoid the negative reaction of the market. The BB's action panicked the retail investors prompting the selling spree, said a merchant banker.

He however said investors are now more matured than in the past because some big investors were also seen buying shares.

The prices of banking stocks have been upward for the last several months so the sector deserved some price correction, he added.

Yesterday, the market opened on a flat note and shortly started to decline.

At one point, it shed 90 points and also regained some ground. The recovery however did not sustain amid the selling spree, said UCB Capital Management Ltd in its daily market research.

Most of the major sectors witnessed correction. The banking sector lost 3.23 percent, while telecommunications gained 0.96 percent.

LankaBangla was the highest traded share with turnover of Tk 59.84 crore, followed by Uttara Bank with Tk 31.28 crore.

On the day, 92 securities gained, 205 declined and 35 remained unchanged. The DS30 and DSES indexes were up 15.49 and 5.39 points respectively.

Still, the banking sector led the market accounting for 44.48 percent of the total turnover. In fact, the sector has been topping the turnover list since August.