The second quarter of 2026 concluded with a notable expansion in secondary equity market turnover and benchmark index valuations across Bangladesh's premier bourses. This late-quarter surge reflected an alignment of fiscal policy incentives, institutional portfolio rebalancing ahead of the fiscal year-end, and calibrated market surveillance interventions. However, the operational environment for capital markets continues to be conditioned by wider macroeconomic imbalances, persistent inflationary pressures, external sector constraints, and deep-seated structural vulnerabilities across the domestic banking system. This review provides senior economic policymakers with a sequenced assessment of recent equity market performance, liquidity movements, regulatory actions, and systemic risks, concluding with strategic policy levers required to foster sustainable market deepening.

Macroeconomic Setting and Balance of Payments Context

Capital market intermediation throughout the period under review was shaped by complex macroeconomic crosscurrents. Real economic expansion has moderated, with annual GDP growth recorded at 4.14 percent under World Bank WDI metrics for FY2023, against the provisional BBS estimate of 6.0 percent for FY23. Headline price pressures have remained elevated, constraining domestic household savings and altering real investment returns. The annual average CPI inflation reached 10.47 percent according to the World Bank 2024 assessment, having stood at 9.7 percent in December 2024 according to BBS reporting.

`` +-----------------------------------------------------------------------------------+ | MACROECONOMIC BASELINE INDICATORS | +------------------------------------+----------------------------------------------+ | Real GDP Growth (FY2023 WDI / BBS) | 4.14% (World Bank) / 6.0% (BBS provisional) | | CPI Inflation (Annual / Dec 2024) | 10.47% (World Bank 2024) / 9.7% (BBS Dec) | | External Reserves (IMF BPM6) | USD 31.07 billion (Dec 2024) | | Nominal Exchange Rate | 122.75 BDT per USD (End-Dec 2024 mid-rate) | | Fiscal Deficit (% of GDP) | 4.7% (Revised Budget FY2023-24) | | Public Debt (% of GDP) | 40.1% (World Bank / IMF 2024) | | Merchandise Trade Account | Exports: USD 44.5B / Imports: USD 63.7B | | Secondary Current Account Support | Remittances: USD 23.91B (+10.66% YoY) | | Banking System Asset Quality | Non-Performing Loan Ratio: 35.73% | +------------------------------------+----------------------------------------------+ ``

External sector balances have exerted an ongoing influence on sovereign financial conditions and domestic liquidity. Total merchandise exports reached USD 44.5 billion for FY2023-24 on an adjusted basis, while total merchandise imports stood at USD 63.7 billion on a goods, c.i.f. basis for FY2023-24. The resulting trade gap has been partially buffered by resilient remittance inflows, which totaled USD 23.91 billion in FY2023-24, representing an expansion of 10.66 percent year on year. Foreign exchange reserves, calculated under the IMF BPM6 methodology, stood at USD 31.07 billion as of December 2024, alongside a mid-rate exchange rate of 122.75 BDT per USD at end-December 2024.

On the public finance front, the revised budget for FY2023-24 recorded a fiscal deficit equal to 4.7 percent of GDP, while total public debt stood at 40.1 percent of GDP according to joint World Bank and IMF assessments for 2024. Most critically for capital allocation, credit conditions within the domestic financial system have been impaired by an elevated non-performing loan ratio of 35.73 percent, established following the Bangladesh Bank Basel III asset reclassification in late 2025. This banking sector overhang has constrained traditional credit transmission channels, elevating the importance of functional capital markets as non-bank conduits for long-term corporate finance.

Secondary Market Dynamics and Year-End Liquidity Inflows

The final trading week of the fiscal year saw a sharp reversal of prior lethargy, culminating in consecutive sessions of accelerating turnover and price appreciation on both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE).

The initial pivot occurred following decisive regulatory surveillance measures on June 22, 2026, when the DSE reactivated its real-time trading suspension tool, halting transactions in Sonargaon Textiles, Shyampur Sugar Mills, and Bangladesh National Insurance following irregular price spikes. By restraining speculative volatility in distressed counters, regulatory authorities restored a degree of baseline trading confidence.

`` +-----------------------------------------------------------------------------------+ | BENCHMARK DSEX LIQUIDITY TRAJECTORY | +------------------+---------------+---------------------+--------------------------+ | Trading Session | DSEX Level | Index Gain (Points) | Total Turnover Value | +------------------+---------------+---------------------+--------------------------+ | June 28, 2026 | 5,719 | +66.00 (+1.17%) | Tk 1,371 crore | | June 29, 2026 | 5,723 | +nearly 3 | Tk 1,351.52 crore | | June 30, 2026 | 5,763 | +40.30 | Tk 1,570 crore (15.7B) | +------------------+---------------+---------------------+--------------------------+ ``

A broader rally materialized on Sunday, June 28, 2026. The benchmark DSEX surged by 66 points, or 1.17 percent, to close at 5,719. This advance marked the first time the benchmark crossed the 5,700 threshold in nearly 22 months. Trading turnover jumped by 24 percent to Tk 1,371 crore, supported by heavy institutional allocations into blue-chip bellwethers, prominently exemplified by Beximco Limited hitting its upper circuit breaker limit.

The upward trajectory consolidated on Monday, June 29, 2026. The DSEX gained nearly 3 points to settle at 5,723, locking in a cumulative gain of 168 points across five trading sessions commencing June 23. Market capitalisation rose by Tk 874 crore to reach Tk 6.97 lakh crore. Total floor transactions stood at Tk 1,351.52 crore, representing a slight contraction of 1.42 percent relative to the preceding session. Large-cap issues continued to direct aggregate liquidity, with the blue-chip DS30 index advancing 4 points to 2,166, while the Shariah-compliant DSES index fell marginally by 0.23 points to 1,157. Market breadth remained positive: of the 399 issues traded, 178 advanced, 158 declined, and 63 remained unchanged.

The market reached its quarterly peak on Tuesday, June 30, 2026. The DSEX gained 40.3 points to settle at 5,763, extending its continuous advance to a sixth consecutive trading session. Daily turnover jumped 16.4 percent to reach Tk 15.7 billion (Tk 1,570 crore), up from Tk 13.5 billion in the previous session. This performance breached the Tk 15 billion liquidity threshold for the first time in roughly two years. Market breadth widened significantly: of 396 issues traded on the DSE, 243 advanced, 89 retreated, and 64 closed unchanged. Regional bourses mirrored this trend: the Chittagong Stock Exchange recorded gains in both its major indices, with the CSCX rising 59.7 points and the CASPI advancing 98.1 points.

Market momentum on June 30 was propelled by three primary catalysts:

1. End-of-fiscal-year balance sheet and portfolio adjustments by corporate treasuries and institutional asset managers.
2. Aggressive bidding by retail and institutional participants to build positions in qualifying blue-chip equities prior to the June 30 tax year cutoff, thereby capturing statutory tax rebate benefits.
3. Rapid capital deployment in response to comprehensive fiscal and market incentives enacted in the national budget.

Sectoral Composition and Single-Issue Volatility

Turnover and price returns across sectors displayed sharp dispersion during the closing sessions of June 2026, indicating selective factor rotation rather than indiscriminate index-tracking accumulation.

On June 30, 2026, sectoral turnover was dominated by three primary industries, which together absorbed over 40 percent of aggregate trading activity:

• Textiles led overall market turnover, capturing 16.3 percent of total trades.
• Banking accounted for 13.5 percent of aggregate volume.
• Pharmaceuticals represented 11.4 percent of daily market activity.

`` +-----------------------------------------------------------------------------------+ | SECTOR RETURN DISPERSION (JUNE 30, 2026) | +----------------------------------+------------------------------------------------+ | Sector Classification | Daily Price Return (%) | +----------------------------------+------------------------------------------------+ | Engineering | +3.2% | | Mutual Funds | +2.5% | | Services | +2.2% | | Paper | -0.4% | | Miscellaneous | -0.7% | | Travel & Leisure | -2.2% | +----------------------------------+------------------------------------------------+ ``

Across broader sectoral indices on June 30, Engineering stocks advanced by 3.2 percent, Mutual Funds expanded by 2.5 percent, and the Services sector rose by 2.2 percent. In contrast, profit realization drove declines in other segments: Travel & Leisure retreated by 2.2 percent, Miscellaneous shed 0.7 percent, and Paper slipped by 0.4 percent.

Individual equity movements on June 29, 2026, illustrated the divergence between fundamentally supported or corporate-event-driven counters and distressed entities. Rahim Textile recorded the largest advance among active issues, climbing 8.73 percent to close at Tk 225.30. JMI Syringes & Medical Devices gained 7.43 percent, IPDC Finance advanced 6.55 percent, CAPM IBBL Islamic Mutual Fund climbed 6.18 percent, and Indo-Bangla Pharmaceuticals appreciated by 6.02 percent. Conversely, stressed non-bank financial institutions suffered notable capital flight, with People's Leasing and Financial Services falling 7.63 percent to Tk 1.20.

Large-capitalisation issues played a crucial role in absorbing floor turnover. Heavy trading and a visible price rebound in heavyweight issues, such as Beximco Limited, provided stability to headline indices on June 29 as earlier selling pressure dissipated, setting the foundation for the broad market breakout on June 30.

Legislative Catalysts: The Finance Bill 2026 Reform Package

The immediate catalyst for the late-quarter re-rating of domestic equities was the formal passage of the Finance Bill 2026 (for FY 2026–27) by parliament on Monday, June 29, 2026. The statute introduced structural adjustments to the tax regime governing capital assets and institutional investment vehicles.

`` +-----------------------------------------------------------------------------------+ | FINANCE BILL 2026 CAPITAL MARKET INITIATIVES | +------------------------------------+----------------------------------------------+ | Individual Dividend Income Tax | Rate reduced from 30% to 25% | | Mutual Fund Tax Rebates | Investment ceiling limits fully removed | | Public Offering Regulations | Entry thresholds for corporate IPOs eased | | Fixed Income Framework | Strategic expansion of local bond markets | | Structured Finance | Legislative framework for asset securitization| | Global Offshore Intermediation | Specialized funds located in financial hubs | +------------------------------------+----------------------------------------------+ ``

The reduction in the individual dividend income tax rate from 30 percent to 25 percent directly increases after-tax equity yields for domestic investors. By narrowing the gap between post-tax dividend returns and nominal deposit rates, this measure improves the investment appeal of cash-generative public corporations.

Furthermore, the abolition of investment ceilings on mutual fund tax rebates addresses a structural barrier that has historically hindered collective investment schemes. By allowing uncapped rebate eligibility, the statute incentivizes high-net-worth and retail investors to allocate capital through professionally managed collective structures rather than unhedged direct positions.

Alongside these fiscal measures, the Finance Bill 2026 relaxed entry thresholds for initial public offerings (IPOs), aiming to resolve the chronic shortage of high-quality corporate listings on the DSE and CSE. The legislation also establishes statutory pathways to introduce alternative capital instruments, explicitly prioritizing:

• The expansion of domestic fixed-income and bond markets to alleviate corporate dependence on short-term bank loans.
• The institutionalization of asset securitization mechanisms to convert illiquid balance sheet assets into tradable debt securities.
• The establishment of specialized, overseas-based investment funds domiciled in international financial centers, designed to mobilize foreign portfolio capital and non-resident domestic savings.

Systemic Risks and Institutional Interlinkages

Notwithstanding the positive market momentum at the end of the second quarter of 2026, policymakers must remain attentive to underlying macro-financial vulnerabilities that threaten the stability of these recent gains.

The principal domestic vulnerability centers on the high degree of stress within the commercial banking sector, evidenced by the 35.73 percent non-performing loan ratio following Basel III reclassifications in late 2025. This magnitude of impaired assets constrains the supply of institutional margin finance, ties up bank equity capital, and limits liquidity provisioning to institutional brokerage arms. Furthermore, severe distress in individual non-bank financial institutions, reflected in the market valuation of People's Leasing and Financial Services at Tk 1.20, illustrates persistent balance sheet fragility across the broader financial intermediary sector.

A second systemic risk stems from the concentration of trading activity in a narrow set of heavily capitalized stocks. While the rally in large-cap equities like Beximco Limited drove index appreciation and turnover expansion, it also concentrates downside risks. Price corrections in a handful of index-heavy counters can rapidly dampen overall market sentiment.

Finally, broader macroeconomic constraints continue to restrict domestic risk appetite. With CPI inflation standing at an annual average of 10.47 percent (and 9.7 percent in December 2024), and an exchange rate of 122.75 BDT per USD, real household discretionary income remains under pressure. Unless inflation moderates and external buffers stabilize, retail capital inflows into secondary equity markets may face sustainability constraints once the seasonal June 30 tax rebate period passes.

Strategic Policy Levers for Capital Market Deepening

To translate late-quarter market momentum into durable institutional capital formation, policymakers and regulatory authorities should coordinate interventions across four main areas:

1. Operationalize Fixed-Income and Securitization Frameworks: In alignment with the Finance Bill 2026, the Bangladesh Securities and Exchange Commission (BSEC) and the Ministry of Finance must accelerate statutory guidelines for asset-backed securitization and private corporate bond listings. Diversifying the capital market away from pure equity trading toward fixed-income instruments is necessary to absorb sovereign debt issuance, ease fiscal deficit financing (currently at 4.7 percent of GDP), and offer institutional investors predictable, risk-mitigated yields.
2. Advance Collective Investment Intermediation: Following the elimination of investment caps on mutual fund tax rebates under the Finance Bill 2026, regulatory oversight should focus on fund governance, transparent net asset value reporting, and product design. Expanding the domestic mutual fund industry will help professionalize floor trades, moderate retail speculation, and support institutional demand for corporate equity issuances.
3. Maintain Real-Time Market Surveillance: The market intervention of June 22, 2026, which successfully halted irregular trading in Sonargaon Textiles, Shyampur Sugar Mills, and Bangladesh National Insurance, demonstrated the value of automated, real-time market cooling mechanisms. Market authorities must continue deploying automated volatility halts to curb speculative trading in distressed counters, protect retail investors, and maintain market integrity.
4. Channel Global Capital through Offshore Fund Architecture: Government agencies should implement the specialized overseas fund frameworks outlined in the Finance Bill 2026. Establishing dedicated investment vehicles in global financial centers will enable the capital market to capture offshore diaspora remittances, which totaled USD 23.91 billion in FY2023-24, routing balance-of-payments inflows directly into long-term domestic capital formation.