Niaz Mahmud: Bangladesh's capital market staged a remarkable recovery during the first half of 2026, with the benchmark DSEX index climbing more than 19 percent year-on-year as optimism over political stability, regulatory reforms and attractive valuations reignited investor participation after a prolonged period of weakness.

According to the Half-Yearly Market Wrap (January–June 2026) released by Sheltech Brokerage Limited, the DSEX gained 924.44 points, or 19.11 percent, to close at 5,762.83 by the end of June. Average daily turnover more than doubled to Tk 8.0 billion, reflecting renewed market activity and stronger investor confidence.

The report attributed the market's performance to several key developments throughout the six months. Early gains were driven by optimism surrounding the country's transition toward an elected government, which eased political uncertainty and pushed the DSEX above the 5,600-point mark.

As per half-yearly review of BRAC EPL, Bangladesh Market staged a strong recovery in H1’26, supported by improved investor sentiment, higher turnover, and regulatory normalization. Market turnover during H1’26 reflected dynamic sentiment from several developments, notably - post-election policy expectations, US-Israel attack on Iran, FY27 budget-related measures, appointment of new BSEC commission, and the removal of the last remaining floor prices on BEXIMCO and ISLAMIBANK. 

DSEX, the benchmark free float weighted market index, gained 18.4% in H1’26, while equity market cap increased 2.9%. 

DSEX crossed the 5,700 mark in late June for the first time in nearly 22 months, reflecting stronger participation across the market.

However, the rally was interrupted by geopolitical tensions in the Middle East, particularly the Iran-Israel-US conflict, which triggered widespread profit-taking and panic selling. The benchmark index fell sharply before stabilising as geopolitical concerns eased and investors shifted their focus to domestic policy developments.

Market sentiment improved significantly in the latter part of the period following the appointment of a new chairman of the securities regulator and expectations of market-friendly reforms included in the proposed national budget and Finance Bill. Tax rebate-driven investments ahead of the eligibility deadline also contributed to the renewed buying momentum, allowing the DSEX to finish the period at its highest level in nearly two years.

Sector-wise, Services & Real Estate emerged as the best-performing segment with a 71.39 percent gain, followed by Insurance, which rose 62.99 percent, and Information Technology, up 49.43 percent. Banking shares also made a strong comeback, gaining nearly 29 percent and providing one of the largest positive contributions to the benchmark index.

The report noted that trading activity remained concentrated in Insurance, Engineering, Pharmaceuticals and Chemicals, highlighting broad-based participation across multiple sectors.

Among individual stocks, DOMINAGE topped the gainers with a remarkable 659 percent increase, reportedly supported by optimism over a proposed acquisition. APEX Spinning, GQ Ball Pen and Meghna Petroleum also delivered exceptional returns during the period.

On the other hand, BEXIMCO suffered the steepest decline, losing more than 73 percent after the removal of its floor price. Islami Bank Bangladesh, BAT Bangladesh and several financial institutions also weighed on the benchmark index.

Blue-chip banking stocks played a significant role in lifting the market. BRAC Bank, City Bank, Pubali Bank, Prime Bank and Eastern Bank were among the largest positive contributors to the DSEX, while BEXIMCO and Islami Bank remained the biggest drags on the index. Pharmaceutical giant Beximco Pharma emerged as the most actively traded stock during the period, reflecting sustained institutional and retail investor interest.

The brokerage also pointed to improving relative valuations. The market's price-to-earnings ratio remained well below its historical average, while the earnings yield moved above the yield on 10-year government treasury bonds from March onward, making equities comparatively more attractive despite a challenging macroeconomic environment characterised by elevated inflation, weak private-sector credit growth and exchange-rate pressures.

Looking ahead, Sheltech Brokerage expects the DSEX to extend its recovery and potentially reach the 6,000-point milestone during the second half of 2026. The outlook is supported by expectations of continued regulatory reforms, improving corporate earnings, a revival of the initial public offering market and sustained political stability.

Nevertheless, the report cautioned that investor confidence will largely depend on the effective implementation of proposed reforms, stronger corporate profitability and improving macroeconomic fundamentals. While short-term volatility cannot be ruled out, analysts believe Bangladesh's equity market has entered a more constructive phase after several years of subdued performance.