Internship Report by Tanzina Ahmed Choudhury

Internship Paper- Spring 2011|1
Ms. Nusrat Jahan
Intern Supervisor
Spring 2011 Internship Program
School of Business
Independent University, Bangladesh.
May 4, 2011
Subject: Submission of Internship Report- Spring, 2011.
Madam:
I take great pleasure to inform you that as per the requirement forwarded by the
university, I have prepared my Internship Report on the topic- “Recent Stock Market
Turmoil, Its Macroeconomic Impact, How LBSL has Handled the Situation, and What
more LBSL Could Do to Maximize its Returns in Future”-provided by the Human
Resource Department of Lanka Bangla Securities Ltd.
I feel highly delighted to present my paper before you as I believe that this contains
some fresh interpretations of many conventional practices. Again, as I am
completely new in this sector, the analysis and findings presented here could be
further used as an example of the view of a general countryman.
I look for your kind appreciation.
Sincerely Yours:
__________________________________
Tanzina Ahmed Choudhury

Acknowledgement
I earnestly thank Mr. Saif Ahmed Chowdhury, Manager & Accounts In-Charge of
LBSL, Chittagong Region, for acting as a mentor round-the-clock and showing me
the right direction whenever I started going off-track.
Nevertheless, I must acknowledge the continual support I got from my Internship

Supervisor Ms. Nusrat Jahan through guiding me during the whole Internship period.
Also, I should express my gratitude to the following people for being so

accommodative that I never felt left-out during my whole intern journey:
1. Mr. Mohammed Nasir Uddin Chowdhury, CEO & Director, LBSL
2. Mr. Wali Ul Islam, Deputy Chief Executive Officer, LBSL
3. Mr. Mohammad Amir Hossain, DGM & Regional Chief, Chittagong
4. Mr. Sheikh Munir Ahmed, Senior Manager & Branch In-Charge, LBSL,
Nasirabad Branch
5. Mr. Mohammed Showkat Nazim, Manager & Branch In-Charge, LBSL,

Khatungonj Branch
6. Mr. Md. Ashaduzaman Riyadh, Research Analyst & In-Charge, Research &
Analysis Department, LBSL
7. Mr. Farhad Ahmed Chowdhury, In-Charge, Human Resource Department,

LBSL
Finally, I thank all other LBSL staffs whose cooperation I found to be really kind and
supportive.
Indeed, I wish every success of LBSL in future.
___________________
Executive Summary
As I intend to become a Security Analyst in future, I was determined to do my BBA
Internship in a brokerage house. I felt very lucky when I got response from LBSL, the
topmost brokerage house in Bangladesh, and commenced my Senior Project with a
topic provided by them.
When I started doing my research, I began only with the few basic concepts of
Investments that I had learnt in my Bachelors. But while working, I learnt lots of new
things which improvised my thought capacity more than ever and I found myself
gradually turning from an amateur to a professional.
As I had four objectives and had quite little ideas on the issues, I started working
with all of them at once and soon found myself completely engrossed in books,
magazines, newspapers, etc, not being pressurized by the tough objectives, but to
douse my curiosity for learning more about the market every moment.
The first objective being identifying the reasons behind the market crisis required
both general and expert opinions. Hence, I developed a questionnaire and gathered
data according to the calculated sample size. The insights provided me with many
possible reasons among which the Central Bank Directive to limit banks’ capital
market exposure was pointed by every respondent. In my paper, I have jotted down
all the reasons with supportive explanations which, I believe, will help the readers
by acting as a reference for future use.
My second objective was related to forming some predictions regarding the

macroeconomic impact of the crisis and according to me, the capital market will
certainly experience a upper ride but with the cost of increasing real estate prices
and in-turn, increasing the chances of failure of the Bank Sector just how it
happened in US during 2007-08.
The third objective forwarded to me included evaluating the reactions of LBSL

during the period of extreme volatility. To my findings, LBSL proved its edge in
combating debacles and the way they plan ahead is simply commendable.
My fourth objective was to propose some possible actions that will help LBSL
minimize the risks of future turmoil and maximize their future returns. In this
portion, I have highlighted the benefits of some complementary scopes available in
the market surroundings as well as recommended some possible ways of attracting
new investors followed by suggestions on supportive promotional activities.
At the end, I have included a detailed supplement containing some raw analysis on
the market stakeholders which, I confirm, will act as an added pleasure for
interested readers.
Finally, I must say that my Internship experience could have never been better than
what I experienced in LBSL. I assert, what I learnt here, has added a golden feather
in my hat and this will surely act as the key contributor in my mission of being a
competent Security Analyst.
_________________
Disclaimer
I confirm that everything presented in this report are based on my own views and
not copied from any other source. If any resemblance is found, it would be purely
coincidental and I would be available whenever clarification is needed.
I earnestly seek for feedback from the readers. Hence, feel free to send your
comments to the following address:
izznishat@yahoo.com
---Tanzina Ahmed Choudhury
_________________
Table of Contents
Chapt Chapter Point Page
Topic
er No. Title No. No.
1.0 Introduction 8
1.1 Origin of the Report 8
Introductio 1.2 Background of the Internship 8
1
n The Accommodator- Lanka Bangla Securities
1.3 8
Ltd.
1.4 Objectives of the Study 9
Methodolog 2.0 Methodology 11
2
y 4.1 Limitations of the Study 12
Possible 3.0 Possible Reasons Behind the Crisis 14
Reasons 3.1 Summary of the Observations and Findings 14
3
Behind the Illustration of the Findings- Reasons Behind
3.2 15
Crisis the Crisis
4.0 Possible Macroeconomic Impact 24
Decline in Government Turnover Tax
4.1 24
Revenue
Possible
4 Decline in Government Tax Revenue from
Macroecono 4.2 24
Dividends and Selling of Sponsor Shares
mic Impact
4.3 Increasing Interest Rates 24
4.4 Rise in Capital Market Indexes 25
Related Findings From the Questionnaire
7.0 28
Survey
Related
7.1 Age and Education Level of the Investors 28
Findings
7.2 Occupation of the Investors 30
7 From the
Relation among Income, Concern and
Questionnai 7.3 31
Diversification
re Survey
7.4 Reasons behind the Turmoil 33
7.5 Possible Healing Strategies 34
8 Conclusion 8.0 Conclusion 35
9 Supplement 9.0 Supplement 37
References
Bibliography
CHAPTER -1
1.0 INTRODUCTION
1.1 Origin of the Report
This report is prepared to fulfill the internship requirement of Lanka Bangla

Securities Ltd. to be submitted to the company by 10 April, 2011.
1.2 Background of the Internship
BBA 499 (Internship/Senior Project), being a mandatory course offered by the

Independent University Bangladesh, bears the basic ideology to introduce the
young graduates to the work-world as soon as they reach the completion of
undergraduate studies to make them efficient and eligible for being among the
leaders of tomorrow.
1.3 The Accommodator- Lanka Bangla Securities Ltd.
Lanka Bangla Securities Limited (LBSL) is a subsidiary of Lanka Bangla Finance

Limited and a leading equity brokerage house in the country with a diverse clientele
of institutions, high net worth individuals, foreign funds and retail investors. The
company commenced stock broking activities in 1997 and has over time become
the largest stock broking company in the country having developed a strong team
of highly skilled and experienced professionals.
LBSL (Formerly known as Vanik Bangladesh Securities Ltd) started its stock broking
business in 1997 trading on the Chittagong Stock Exchange (CSE) Ltd, while
commencing trading on the Dhaka Stock Exchange (DSE) in1998. The company was
renamed Lanka Bangla Securities with effect from 27 April 2005 following a
restructuring of the company.
To fulfill the accommodator requirement, the Intern feels happy to be chosen by

Lanka Bangla Securities Ltd.
1.4 Objectives of the study
• To find out the causes of the recent capital market crisis.
• To figure out the consequent impact of this crisis in Bangladesh Economy.
• To evaluate how LBSL, as a leading brokerage house, has handled the situation.
• To highlight some possible moves for LBSL in order to minimize such risk to
maximize its returns in future business operations.
___________________________
I n t e r n s h i p P a p e r - S p r i n g 2 0 1 1 | 10
CHAPTER -2
2.0 METHODOLOGY
o Literature Review: As the research was based upon a current and

sensitive issue, very little reliable data were publicly available based on
which the researcher could run a literature review. Also, as the objectives
were forwarded by the sponsor, the researcher had an advantage to skip
the literature review process which is usually done to formulate objectives
for the research.
o Observation: To get an on-location idea on capital markets, the researcher

stayed round the clock in one among the LBSL Branches regularly during the
whole turmoil-period.
o Experience Survey: The researcher was involved with direct talks with many
capital market specialists on a regular basis in order to gain a hands-on idea
about the recent crisis situation.
o Questionnaire Survey: The researcher had direct talks with many investors
(both retail and Institutional) and a questionnaire was filled by them in order to
judge their thoughts on the market as well as their knowledge and awareness
about the market functions.
[Population Size: 3365225 (As on 25 January, 2011), Confidence Level: 95%, Sample
Size: 54, Possible Percentage of Sample Picking a Particular Answer: 50%,
Confidence Interval: 13.34 persons]
o Disguised Interviews: While talking with investors, sensitive to talk about

the capital market issues directly, disguised questions were used and the
questionnaire was filled later based on the answers of those respondents.
2.1 Limitations of the study
• As the topic is highly sensitive in legal terms, many data could not be collected
by the intern that could have made the report a lot more precise and
informative.
• The questionnaire survey is regionally biased because it focuses only on the

investors who are operating from Chittagong. As there were regular ferocious
demonstrations ongoing around the brokerage houses in Dhaka during the time
of the research, the intern could not manage to reach investors operating from
Dhaka due to safety reasons.
• There is high degree of variations in the available market statistics produced by

different sources which often put the intern in a dilemma on determining the
level of authenticity of the data collected.
• The capital market being an extremely dynamic one, it was often hard for the
intern to have important respondents spare their time to have talks with her.
____________________________
CHAPTER -3
3.0 POSSIBLE REASONS BEHIND THE CRISIS

3.1 Summary of the Observations and Findings
o The share market bubble was created during 2003-04 as a consequence

of low bank interest rates prevailing at that time.
o During late 2006-07, private banks went for an aggressive race of

grabbing higher market shares by offering low interest rates associated
with loan-giving with less covenants. Due to easy availability of little-
covenanted loans, people started to invest in the capital market as the
only source of making profitable investments offering quick and high

returns. [This supports the reasons of the 2006-07 rise in Figure 1-
Declining Interest Rates>>Increasing Money Flow from Banks>>Rising
Inflation]
o The government’s decision to let the corrupt whiten their black money
was another stimulator in fueling the market bubble. [This supports the
reasons of the fall starting from mid 2007-08 in Figure 1- As there was an
anti-corruption drive going on, the venal found the capital market as the
best place for hiding their illegal earnings easily. As the money flow from
banks did not increase (in fact deposits at banks highly increased that
time as the dishonest started opening fake bank accounts in their kith and
kin’s names in order to hide their actual wealth) the inflation rates started
to drop as people had more wealth and could offer lower prices for their
tradable commodities.
o The actual bubble was created since early 2007. The data series of the
market turnover compared to those of market capitalization clearly signals
the shift from a buyer dominated market to a market with sellers having
stronger bargaining power. It’s obvious that a planned game was being
played by some investors who were not only intelligent but also they had
thorough concepts of the rules and regulations related to the market
which helped them earn abnormal profits without breaking any law. Again,
high numbers of BO accounts were being opened at that time as people
ran for quick gains in the rising market. The continuous injection of small
funds potentially hid the disbursements of large amounts of money from
the market by the manipulators as the disbursements were done carefully
and stage by stage making it visibly unnoticed unless statistics were
examined cautiously on a regular day-to-day basis.
As a last note, we can say that the bubble created in 2004 was being
vigorously fueled since 2007 and the recent market crash was nothing but only due
to the imposition of many rules within a short span of time. Had the rules been
coming in a row rather than coming at once, the market bubble would not have
busted rather the air of the bubble would have come out slowly resulting a gradual
and tolerable drop in the indexes.
3.2 Illustration of the Findings- Reasons Behind the Crisis
3.2.1 Growing number of new retail investors injecting fresh funds

into the market associated with rapid withdrawal of funds by local
and foreign investors in order to realize capital gains
The number of BO Accountholders increased tremendously making the figure reach

to as many as 3,365,225 (as on 25 January, 2011).1
The new entrants injected fresh funds to the market and the market experienced a
huge buying spree from them during last few years. In this regard, the most
interesting fact is that- most of the investors had the idea (because of constant SEC
reminders) that what they were buying were not worth the price, but they still kept
on buying because they had the notion that they will be able to sell it to someone
else at an even higher price (concept of the Greater Fool Theory2 prevails here). On
the other hand, seeing the index rise higher and higher, many investors started
realizing their profits and took their money out of the market gradually. These
actions fueled the market bubble with very much “less than anticipated” money
inside it making it inevitable for a burst to occur.
The Centre for Policy Dialogue describes this huge inflow of new investors, who
started participating vigorously in the capital market while being literally unfamiliar
with the market activities, as participants of the 'Keynesian Beauty Contest3'4-
indeed a strong colorful term which is highly applicable in this case.
1
As cited on http://www.cdbl.com.bd/- accessed on 26 January, 2011
2
Buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else at an
even higher price.- As cited on http://en.wikipedia.org/wiki/Greater_fool_theory- accessed on 26 January, 2011
3
Keynesian beauty contest is a concept developed by John Maynard Keynes. Keynes described the action of rational agents in a market using an analogy based on a
fictional newspaper contest, in which entrants are asked to choose a set of six faces from photographs of women that are the "most beautiful". Those who picked the
most popular face are then eligible for a prize. Keynes believed that similar behavior was at work within the stock market. This would have people pricing shares not
based on what they think their fundamental value is, but rather on what they think everyone else thinks their value is, or what everybody else would predict the
average assessment of value is.- as on http://en.wikipedia.org/wiki/Keynesian_beauty_contest- accessed on 23 February, 2011
4
http://www.thefinancialexpress-bd.com/more.php?news_id=122045- accessed on 23 February, 2011
3.2.2 Institutional investors were reluctant to invest in the market

since last few months5
It was seen from the market trend that the institutional investors were less in a
buying mood from the last few months. This appeared that they were waiting to see
the market direction and were planning ahead.
Again, there might be another reason- because of the expensive money-market, the
institutional investors were concentrating more on managing their own liquidity
which made them less interested to invest in the capital market. The Bangladesh
Bank Directive for industrial loan diversion also fueled the disinterest as well as the
sale pressure from the institutions. Commercial banks also joined the rally of
withdrawing money from the market as they needed to buy more dollars at higher
prices in order to pay for the high import bills.
3.2.3 High investment withdrawal by commercial banks and NBFIs

due to Bangladesh Bank Directive to lower their capital market
exposure below 10% of their total liability6
According to the market research, this was the topmost reason behind the present
capital market crisis. As the banks found the capital market a very much lucrative
source of making money, they invested a huge portion of their deposit liabilities into
the capital market. That is why, when the Bangladesh Bank Directive came to
minimize the exposure into the capital market, the banks went for a huge selling
spree within a really short period.
Bangladesh Bank kept silence when banks and financial institutions were vigorously
investing in securities leading to an aggregate investment of around Tk 250 billion
(25,000 crores) in the stock market by the end of 2010. Accordingly, this over-
demand caused the over-heating of the market and suddenly, when BB enforced all
types of restrictions at a time, a fund-crunch was created in the market which
ultimately led to the present crisis situation.7
5
http://rashedchittagong.blogspot.com/2011/01/market-volatility-affects-small.html- accessed on 10 February,
2011
6
http://rashedchittagong.blogspot.com/2011/01/market-volatility-affects-small.html- accessed on 10 February,
2011
7
3.2.4 Extraction of money from the investors by the Multilevel

Marketing (MLM) Companies
The lucrative promises of wealth and happiness associated with quick and easy
profits lured many investors to go for the various schemes offered by the many
MLMs (24 MLMs were operating in Bangladesh during 2006 while 17 others,
claiming themselves as MLMs, were identified carrying out their operations8 and
the figure has increased since then as more MLMs were emerging). This caused a
high amount of investment withdrawal from the capital market as well as refrained
many investors from making fresh investments as they chose to drive their funds
towards the MLMs.
**Two MLMs- “Speak Asia” and “Unipay2u” are under the scrutiny of the
Bangladesh government since the present market crisis has emerged.
3.2.5 Manipulating the loopholes of stock market related rules and

regulations through misusing inside information
Though the current market situation portrays a high possibility of market

manipulation but visibly there is very little evidence that indicate who were behind
that. The Bangladesh Government has set up a probe committee 9 which is hoped to
disclose the true picture before all general market participants soon.
3.2.6 Frequent changes in decisions taken by SEC and Central Bank

(BB)
Apart from the other reasons, economists are also blaming the frequent whimsical
changes in policies (especially in share credit rules) made by SEC as well as some
mistimed macroeconomic decisions from the Central Bank. 10
8
http://www.scribd.com/doc/38551786/Social-Sinario-of-MLM-in-Bangladesh- accessed on 1 March, 2011
9
http://theindependentbd.com/business/stockmarket/31192-stocks-crash-govt-may-cut-time-for-prove-
committee.html- accessed on 27 January, 2011
10
http://gurumia.com/2011/01/24/economists-put-regulators-on-the-rack/- accessed on 22 February, 2011
3.2.7 BB measures (raising the CRR and SLR)
To strengthen the capital base of the banks operating in Bangladesh, BB raised the
Cash Reserve Ratio and Statutory Liquidity Reserve Requirement by 0.5 percentage
points. 11
3.2.8 Increasing Call Money Rate
The Monthly Weighted Average of Call Money Rate increased from 4.35% during
April 2010 to 32.76% by 21 December, 2010.12 By December, 2010, the rate hit a
height of 175%13 which discouraged the banks to go for interbank borrowings and
made them withdraw huge portions of their investments from the capital market.
3.2.9 Spreading of various rumors among the retail investors
Majority of the Bangladeshi Retail Investors are rumor-driven and have a tendency
to start hopping once learning about any new opportunity. Most of them pay so
much concentration towards making moves to reap the benefits of any chance that
they do not notice when their interest becomes their greed and eventually makes
their every efforts fail.
11
http://bdnews24.com/details.php?id=181733&cid=2- accessed on 2 February, 2011
12
Economic Overview of Bangladesh, LBS Yearly Market Review, Issue 47, December 2010, Page-15
13
http://bdnews24.com/details.php?id=181733&cid=2- accessed on 2 February, 2011
Undoubtedly all the points mentioned above have some contribution in making the
indexes dive deep in such a short span of time (e.g. the DGEN dropped from
8723.18 points14 at December 01, 2010 to 5,800.94 points 15 by February 24, 2011).
But if we look from a broader perspective, we can easily find out the main cause of
this crisis deeply rooted during the period 2007-08.
To get an even clearer view, we Figure 1: Rate of Inflation

12 (%)
could analyze the inflation rates 10
8
keeping the base at 2005-06. 6 Inflation(%)
During 2005-06 and 2006-07, 4

2
the inflation rates were 7.16% 0
20 01
20 02
20 -03
20 -04
20 05
20 -06
20 07
20 -08
20 09
0
and 7.20% respectively which
-1
-
-
-
-
00
05
07
08
01
02
03
04
06
09
20
eventually jumped to 9.94%

during 2007-08 following a
sharp drop to 6.66% during the
following period 2008-09. The rate again went up to 7.61% by 2009-10. When we
put all these data in the
Figure2: Weighted Avg. Bank Interest Rates
following line graph, the steep
drop surrounded by brown
dashes inevitably refers to
something which is not natural
at all.16 [It can be argued that
during 2007-08, the world
inflation might had been much
higher as well but according to
the data provided by a well-
recognized not-for-profit
international statistical agency,
14
Statistical Snapshot of DSE Market, LBS Yearly Market Review, Issue 47, December 2010, Page-20
15
Data collected through Market Observation
16
Economic Overview of Bangladesh- Statistical Review, LBS Yearly Market Review, Issue 47, December 2010, Page-
15, http://www.dsebd.org/dse_nrb_pro_usa_2010.pdf- accessed on 27 February, 2011, and Key Economic Data-
Country Profile-DSE Monthly Review, Vol. 25, No 12, Page- 61
it was seen that at that time, the world inflation was experiencing one among its
lowest levels (2.85% in US17- see Chart-118) seen in the past decade. So, it can be
said that it was the internal stimulators which were behind the abnormal movement
of the inflation rates in Bangladesh.]
From the theories, we

know that a high inflation
Chart 1: US Inflation Rates (1990-Jan 2011)
is always associated with
low bank rates. To
examine the validity of
this point, if we review
the interest rates of
previous years, we could
see that interest rates
(both for deposits and
loans) were at a
declining trend from late
2003 and experienced the lowest points throughout year 2004 (See Figure 2). 19
This decline motivated the mass to withdraw their savings from the banks to invest
in the capital market as well as stimulated more loan disbursements which enabled
people to make more capital market investments.
Figure 3: Market Capitalization and Issued Capital

100000
80000
60000 IssuedCapital (Crore Tk.)
40000 Market Capitalization(Crore Tk.)

20000
0
5 6 7 8 9 0 1 2 3 4 5 6 7 8
9 9 9 9 9 0 0 0 0 0 0 0 0 0
9 9 9 9 9 0 0 0 0 0 0 0 0 0
1 1 1 1 1 2 2 2 2 2 2 2 2 2
17
http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp- accessed on 3 April, 2011.
18
http://inflationdata.com/inflation/images/charts/Annual_Inflation/annual_inflation_chart.htm- accessed on 4 April,
2011
19
Statistics Department, Bangladesh Bank
This notion could be justified if we see the market capitalization line (Figure 4)
which shows a sudden sharp rise to Tk. 22492.30 crore from Tk. 9758.70 crore (a
Tk. 12733.6 crore, 130.48% increase) within one year (from 2003 to 2004) while the
Total Issued Capital rose only by Tk. 347.7 crore (from Tk. 4605.5 crore to Tk.
4953.20 crore). 20
But again, the large difference between the increase in Total Issued Capital and
Market Capitalization could be attributed to the release of a huge amount of IPOs.
The highest public offers during
Figure-4: MagnifiedViewofFigure-3
the six-year period, 2000-2006, 25000
was made in 2003 (the total 20000 IssuedCapital

public offers amounted Tk (Crore Tk.)
15000
21
135.20 crore) through listing Market
10000
Capitalization
of 14 IPOs, while only 3 IPOs (Crore Tk.)
5000
followed in the next year, 2004.
0
As these IPOs were sold in the 2000 2001 2002 2003 2004
secondary market at much
higher prices (due to high demand), it resulted in a dramatic rise in Market
Capitalization from year 2003 to 2004. Though this is a normal event, but there is
no denying the fact that this was the Figure-5: Turnover to Market
point where the market bubble was Capitalization
45.00%
40.00%
initially created. 35.00%
30.00%
25.00%
Again, Figure 3 depicts the fact that 20.00%
15.00%
the market capitalization rose by Tk. 10.00%
5.00%
43058.2 crore (a 133.16% increase) 0.00%
from Tk. 32336.80 in 2006 to Tk. 2005 2006 2007 2008
75395 crore in 2007. People had

quite a lot of money at hand that time due to the low interest rates (See Figure 2)
offered by the banks which prompted them to withdraw their deposits as well as
due to the high disbursements of Margin loans against equity by the merchant
banks as they were having excessive cash at that point in time. This was also
associated with the government permission to whiten Illegal Earnings through
20
http://mof.gov.bd/en/budget/er/2008/c5.pdf?phpMyAdmin=GqNisTr562C5oxdV%2CEruqlWwoM5- accessed on 24
February 2011
21
http://www.aims-bangladesh.com/special/AnnualReview2005.pdf- accessed on 27 February, 2011
capital market investments.22. The injection of fresh funds from these new sources
drove the share-prices upward. All these facts are natural according to the capital
market theories. But examining the Market Turnover line reveals the most unusual
scenario of the period being analyzed. It is seen that the market experienced a
sharp rise in Turnover-Market Capitalization ratio during 2007 (42.82 percent23)
while the ratio was 20.13 percent in 2006. 24 Eventually the ratio made its way down
to only 7.2 percent25 by the end of 2008. A “rising turnover-rising market
capitalization” scenario usually indicates high buyer dominance whilst a “falling
turnover-rising market capitalization” scenario bears the sign of a market where
sellers possess stronger bargaining power. This indicates that, from the beginning of
2007, stocks were vigorously being accumulated (by manipulators) which was sold
off at higher prices during the following years but this was so carefully done that it
remained visibly unnoticed and the market bubble started to get even bigger day
by day. If we try to recall, this was also a period of extreme political crisis after the
1990 Mass Movement. The country was in the hands of an unelected caretaker
government (lasting from 13 January, 2007 to 29 December, 2008 26) and the
political unrest spread over every part of the macro-economy making people
assume the capital market as the safest source for making profitable investments.
The most possible reason behind the notion could be the then-prevailing low GDP
contribution of the capital market in the Bangladeshi economy (5.18 % during 2005-
06, then rising straight to 19.55% during 2007-08 which continued during late 2010
reaching to 50.80% by December, 201027). Observing the scenario, some big
players must had been making and implementing plans to reap the profits from this
rising market and from the state of all affairs discussed above, evidently it seems
that- of course there were some- who were playing the game from “behind the
curtain” and the price-rising was not only due to the fresh fund injections but also
due to the continual rolling of funds by some large investors who literally kept on
buying in bulks and selling in parts. In this way, a huge amount of capital must have
22
23
http://mof.gov.bd/en/budget/er/2008/c5.pdf?phpMyAdmin=GqNisTr562C5oxdV%2CEruqlWwoM5- accessed on
February 15, 2011
24
http://gurumia.com/2009/12/31/bangladeshs-capital-market-sees-2009-as-year-of-landmark-achievements/-
accessed on April 8, 2011
25
Key Market Indicators 2006-2010, DSE Market Review, Vol. 25, No. 12, Page- 72
26
http://en.wikipedia.org/wiki/Caretaker_government_of_Bangladesh- accessed on 27 February, 2011
27
Economic Overview of Bangladesh- Statistical Review, LBS Yearly Market Review, Issue 47, December 2010,
Page- 14
gone out of the market which remained visibly unnoticed because of the increasing
number of retail investors entering the market most of whom depending on long-
term investments which made the indexes look good when the real worth of stocks
were substantially lower than what they seemed to be.
_________________________
CHAPTER -4
4.0 POSSIBLE IMPACT OF THE CRISIS ON THE
MACROECONOMY
4.1 Decline in Government Turnover Tax Revenue
The ongoing turmoil has great impact over the Bangladeshi Macro-economy from
many aspects. The most negative impact is seen on the Government Turnover Tax
Revenue. As the government charges 0.015% tax on every transaction in the
secondary market, the present turmoil would decrease the tax revenues greatly (for
example, during the peak of the market on 2010, the government earned as much
as Tk. 60.15 crore approximately which is feared to drop substantially during
2011).28
4.2 Decline in Government Tax Revenue from Dividends

and Selling of Sponsor Shares
Again, a down-market will result in less dividend declaration which would again
result in less earnings for the government from the capital market as cash dividends
are supposed to provide 10% tax on the overall dividend value. Also, upon selling
sponsor shares, directors were bound to give 10% gain tax to the government but
when the market is down, nobody might take the suicidal steps to sell their sponsor
shares at lower prices and thus the government will face a decline in the gain tax
revenues.
28
Total Turnover in 2010=Tk. 4009913 mn---Source: DSE Monthly Review Vol. 25, No. 12, Page- 72
4.3 Increasing Interest Rates

Another negative impact results from the increasing interest rates resulting from
Bangladesh Bank’s movement to contain inflation rates29. The rising interest rates
may result in more deposits to the banks. As the banks are directed to restrict their
exposure in the capital market, they will surely look for other ways to pump the
increasing funds and in the present situation of Bangladesh, where many people are
starting to have quite a sustainable income growth, real estate would be the best
option for making easy loan disbursements. This will surely fuel the real estate
bubble as with time, there would be hardly any buyer to purchase the loan-financed
houses and sellers would be on the rise as many of the owners would like to shred
their houses in order to maintain a good standard of living with the growing global
commodity price indexes.
4.4 Rise in Capital Market Indexes

But the positive side of the “impact-balance” would eventually be tilted towards the
capital market direction. With the rise in the interest rates, cost of investment would
rise which would in turn increase the capital market indexes as the investors will
demand prices higher than their cost-prices and every time one investor will charge
a higher price, the potential purchasing price for another investor will rise
automatically.
Again, a decline in the capital market means a decline in the wealth of the investors
which in turn reduces their purchasing power. As reduction in purchasing power
reduces the elastic demands only, this would reduce the import payments as
importers would lose interest seeing the declining demand followed by the declining
prices. The drop in the import payments will appreciate the value of Taka which will
in turn reduce the “export revenues in local currency”. This will drive many firms to
close or curtail their operations resulting in a rise in the level of unemployment as
well as a decline in the rate of new job creation. Now this category of jobless people
would try to find refuge in the capital market and the increase in the number of
fresh investors willing to buy shares will raise the market index eventually.
29
Interest rates and Capital market indexes are often considered to be two sides of a coin. So, increase in interest
rates signals decline in capital market and vice-versa.
Also, as an alternative scope for utilizing the access liquidity held by the banks
(resulting from the government directive to limit banks’ exposure in capital market)
they might select the losing firms for equity financing and as a result of the close
monitoring, these firms would become firms of good worth and upon becoming
public for generating more funds, they would act as a supplier of a huge volume of
stocks with good fundamentals which eventually would improve the market
structure for a longer period.
To sum up, it can be said that the present market crisis will eventually lead to the
establishment of a more sustainable capital market though with the costs caused by
the decreasing government tax revenues at the beginning as well as with the
potential costs caused by a possible crisis in the real estate sector.
Figure 6: Possible Impact on the Macro

Economy
CHAPTER -7
7.0 RELATED FINDINGS FROM THE QUESTIONNAIRE SURVEY

7.1 Age and Education Level of the Investors
Figure 8: Age of Investors
Figure 9: Education Level of Investors
Objective: Knowing the age would let us know about the risk tolerance capacity of
the investors as well as this, along with the level of education, would let us have
ideas on the popular
Figure8: Ageof Investors purposes for capital market
61-80, 0 penetration by the
increasing number of fresh
46-60, 18-30
18-30, investors.
25.93
44.44 31-45
31-45, 46-60 Findings: Most of the

27.78 61-80 investors are aged between
18 to 30 years. This might
be an indication that due to
increasing unemployment,
Figure9: Eductaion Level of theInvestors
the youth are finding refuge
Refused to None, 3.7 SSC/O None
Reply, 20.37 Levels, 9.26 in the capital market. And
SSC/O Levels the high percentage of
HSC/A
Levels, graduate investors shown in
HSC/A Levels
24.07 Figure 9 indicates the high
College/University popularity of the capital
College/Uni
versity Graduate market among the educated
Graduate, Refused to Reply
youth of Bangladesh (when
42.59
the outcomes of both figures
are coincided for easy statistical measurement).
Points at Support: Nowadays often the jobseekers complain that their university
education is not worthy enough to guarantee them a job. This notion is also
supported by many current employees who had to undergo many training sessions
during the initial periods of their jobs as their past studies did not provide them with
the necessary know-how. On the other hand, many job providers also complain the
same thing that they become bound to give costly trainings to almost all the new
entrants as the universities fail to deliver job-suitable knowledge to the potential
job-seekers. That is why, now-a-days, firms are concentrating more on employee
retention rather than new recruitments while still not imposing extra burden to the
employees as the wide use of IT acts as a helping hand for employees to be multi-
taskers.
Comment: It is certain in this scenario that the average risk tolerance capacity of
the investors will be quite low as the capital market is the only source of income for
the majority of the investors. (The evidence is seen through the continual hostile
demonstrations by the investors during the whole turmoil-period.30)
What could be done: The government can take steps to create more scopes for
employment by establishing more state-owned enterprises as well as
encouragement should be given to the youth to go for newer businesses (like agro
processing, establishing small scale rural electric grids etc.). Also, the universities
should be guided to revise their course-structures to include more real world topics
in the curriculum in order to produce competent and practiced pools of fresh job-
seekers. As well as, universities should promote and offer more majors in the
technical field (like textile engineering, leather engineering, etc.) as the demand in
these fields are at a highly increasing trend nowadays.
30
http://www.demotix.com/news/550674/more-demonstrations-share-prices-fall- accessed on 20 March, 2011
7.2 Occupation of the Investors

Figure 10: Occupation of the Investors
Objective: Knowing the occupation would let us make out how seriously investments
decisions are taken by the investors.
Findings: A
Figure10: Occupation of theInvestors
majority of the
investors are
Unemployed and not Looking… 7.4
students from
Student 31.48
the higher
secondary and Retired 3.7
undergraduate Employed Part Time 18.52 Percentage

level. Though
Business 33.33
the highest
response was Employed Full Time 14.81
for business, 0 5 10 15 20 25 30 35
but it was
observed by the intern that most of the people, basically unemployed, termed their
investments in the capital market as their business not paying attention to the fact
that the while asking, she was meaning a reliable business guaranteeing a
minimum standard amount of periodic income by the option given in the
questionnaire.
Points at Support: The proper definition of business is not familiar to the mass in
Bangladesh. That is why most of the unemployed individuals feel highly protected
and financially secured when they start investing in the capital market out of the
blue and feel happy to term themselves as businessmen.
Comment: The high number of people depending only on the income coming from
the capital market investments make the market even more volatile as they rush
for quicker and bigger gains which eventually contributes in fuelling the market
bubble even at a much higher extent.
What could be done: More employment opportunities should be created as well as

people should be encouraged towards doing minimum profit-guaranteeing

businesses and to keep capital market investments as a side one.
7.3 Relation among Income, Concern and Diversification

Figure 11: Monthly Income of the Investors
Figure12: Investors’ Concern about the Market Direction
Figure11: Monthly Incomeof theInvestors Figure 13: Level of

Diversification
12.96 5000-10000
22.22
10001-20000 Objective: After relating
22.22
9.26
20001-50000 the outcomes from the
12.96 50001-10000 three figures, we would be
20.37
100000 or More able to understand the
Refuse to Reply mindsets of the investors-
whether they are in the
market for a sustainable profit or for windfall gains.
Findings: Though among the persons, who gave definite replies, the highest
percentage of peoples’ income was ranged between Tk. 200001 to Tk. 50000, but
the number of
Figure12: Investors' Concern about theMarket persons earning less

Direction than Tk. 10000 per
140 month was also
120
100 quite high. Again, in
Refuse to Reply
80 Figure 12, we see
60 Not Concerned at All
40 that investors with
Not too Concerned
20
0
the highest concern
Somewhat Concerned
about the market
VeryConcerned
Income are investors whose
incomes are ranged
from Tk. 50001 to
Tk. 100000. On the other hand, the highest level of diversification is seen with the
investors whose incomes are close to Tk. 100000 or above.
Points at Support: Figure13: Level of Diversification

Regarding the level of 250 Insurance Policies
diversification, it can be 200
150 Governmental Saving
said that as people with
100 Schemes
higher incomes have 50 Mutual Fund Schemes
more options to make 0
their investment Company Deposits
choices, the level of

Bank Fixed Deposits
diversification is higher
with them. This
explanation is also applicable to find out the background behind the high amount of
concern regarding the market direction shown by the highest income-earners. As
they place higher amounts of money at stake, it is certain that they will show
interests in the market direction more than others do. Again, investors, whose
incomes are ranged between Tk. 5000 to Tk. 20000, show the least amount of
concern regarding the market directions. In this range, two dominant groups of
people are seen:
One, investors, who are the only earning member of their family
Two, students who invest in the market for maximizing their pocket-money and who
are not required to contribute their incomes to their families
The first group is less concerned because they usually invest in small scales and
often, depend on their brokers for helping them in making their investment
decisions. That is why they feel that they need not think about the market
directions as they consider that they will not be able to make good moves
anticipating the future market conditions as they roll very small amounts of capital
compared to the whole market.
Again, the second group shows fewer concerns because most of them trade in the
capital market for mere practice and they feel that whichever direction the market
goes, that becomes a scope of experience-gaining for them.
Comment: The relations show that all investors are not investing in the market with
homogenous profit motives. This is certainly a good sign but this is applicable for
big markets only, not for a small and emerging market like Bangladesh’s.
What could be done: Moves should be taken to increase the supply of shares as
well as to increase the number of investors in order to lighten the negative effects
of having behaviorally heterogeneous investors in a small market.
7.4 Reasons behind the Turmoil

Figure 14: Reasons behind the Turmoil
Objective: This analysis would let us know about the investors’ perception regarding
the stock market turmoil.
Findings: All the investors were common in the response that the crisis has occurred
mainly due to the Bangladesh Bank directive to limit banks’ exposure in the capital
market within 10% of their deposit liabilities.
Comment: This was indeed the most important player behind the burst of the
market bubble. But if seen from BB’s point of view, there might be some reasons
behind the directive:
1. To contain inflation by restricting money flow in the economy.
2. To channel more funds to the real sector.
3. To protect the interest of the bank depositors.
Though all these points are valid but as a government organ, Bangladesh Bank
should have acted more responsibly so that their acts of protecting bank depositors
do not harm the interests of others as both the groups are the responsibility of the
government. If only BB had expanded the exposure limitation period to a few more
months, the stock market consequences would not have been that fragile.
What could be done: All government organs must put a holistic view over the
possible consequent impacts on every related sector in the economy before taking
any decision in future.
7.5 Possible Healing Strategies

Figure 15: Healing Strategies
31
Objective: The questions asked regarding the healing strategies were designed in
a way so as to understand the level of investors’ knowledge regarding the macro
aspects of the capital market.
Findings: It was good to see that most of the investors were able to provide
thoughtful insights on the asked points.
Comment: The Broadcasting Media should be thanked for farming these ideas into
people’s minds.
What could be done: The government is always expected to take responsible

actions to control the crisis. But on the investors’ part, it would be the best
complimentary act if they abide by the directions provided by the regulators (e.g.
not taking margins for Z- category shares and
Figure15: Possible other similar directions). It feels good to

assert that LBSL has always functioned
HealingStrategies
according to the directives coming from the
Don't Know
regulatory bodies which made them be in the
safer side during the entire turmoil period.
20.37 18.52
31.48
16.67
12.96
53.7
64.81
55.56
25.93
1 2 3
31
1= government move to buy shares, 2=new issues by companies with low paid up capital, 3=inclusion of
government project in stock market
CHAPTER -8
8.0 CONCLUSION
At this instant, most of the capital market investors in Bangladesh are people who
use it as their primary source of earnings. As they solely depend on the market for
living, they unknowingly create a large syndicate which is practically invisible
because of its widespread dimensions. When they transect within the syndicate,
both buyers and sellers assume that they have made an intelligent transaction.
These acts fuel the price bubble so slowly that the regulators miss this by
identifying it as “rising investor confidence”. In this way, the bubble gets bigger
remaining unnoticed by the stakeholders leading to an inevitable explosion. As the

market is going through corrections, to avoid this phenomenon in future, the
regulators might forward some directions demanding the current and potential
investors to have a source of guaranteed income and allowing them to utilize
capital market as an extra source of earnings.
Again, the market should encourage new shares of good fundamentals for making
the market reach a stable level. Family-oriented big businesses should shake off the
traditional fear of losing control once going public. Governmental motivations could
be given in order to display them the benefits of being public as well as to remind
them of the responsibility of the rich to the fellow countrymen. Also, foreign
companies could be encouraged to raise capital from the market for creating safer
diversification opportunities.
In addition, all government organisms should act in a responsible way by running

pilot projects before forwarding any new directive and seeing the effect of the
decision from a holistic point of view so that a clear idea may be got regarding the
overall macroeconomic impact. Moreover, as the Bangladeshi investors mostly
depend on the media for stock market information, care should be taken during the
selection of the media reporters so that their sometimes “immature” way of
interpreting a usual matter do not create any panic among the mass.
As an end note, the intern affirms that it was the efficiency of LBSL that made it
continue standing like a pillar during the total period of disorder (the stable turnover
being the evidence). Strong forecasting capability was the main key that helped
them build the strategies long before the inception of the bear-run. LBSL is still
making predictions and preparing ahead for performing sustainably in the coming
days which clearly demonstrate the elegance of the officials.
CHAPTER -9
9.0 MARKET OBSERVATION: WHAT SHOULD BE DONE

9.1 Effects of Bangladesh Fund

As a “Life-saving Support for an Ailing Market”32, the government announced a Tk.
5000 crore Mutual Fund, named “Bangladesh Fund”, early March, 2011.33 This
declaration helped rebuild the investor-confidence and the bourses saw consecutive
green movements following the assertion. But when IMF officials (while speaking
with the media regarding their conditions of giving Bangladesh credits of $1 billion)
expressed their doubts34 about the fund after assuming the consequences of the
Chart 3: Possible Negative Impact of BGD Fund
(regular) potential disasters that might result from its
implementation, the investors again
dragged down the indexes out of panic.
According to IMF opinion, the

implementation of Bangladesh Fund is
going to pose added risks to its sponsors if
not managed carefully. Though they did not
mention how the negative effect would
occur but from popular understanding, we
can draw two impact-charts justifying the
IMF suspicions.
The effects shown in Chart 3 are the natural

effects that will occur if the fund is not
managed properly. If the fund managers
recklessly invest in a particular rising stock,
it will surely be proved as a suicidal
approach for the fund as well as the
sponsors. To prevent this, the Bangladesh
Fund managers might allocate the investment in the following way.
32
As cited in http://www.thefinancialexpress-bd.com/more.php?news_id=130491&date=2011-03-26- accessed on
March 29, 2011
33
Sponsors: ICB Tk 500 crore, Sonali Bank Tk 200 crore, Janata Bank Tk 200 crore, Rupali Bank Tk 100 crore,
Bangladesh Development Bank Ltd (BDBL) Tk 100 crore and Shadharan Bima Corporation Tk 100 crore,. Agrani
Bank will sponsor Tk 250 crore and Jiban Bima Corporation Tk 50 crore but they are yet to disburse their shares of
the fund.- as cited in http://www.hawker.com.bd/news_details.php?
news_id=128145&val_lan=1&news_category_categorysearch=14- accessed on March 29, 2011
34
http://www.thedailystar.net/newDesign/news-details.php?nid=179387- accessed on March 28, 2011
Share Maximum Limit of Exposure Maximum Limit of

Category Based on the Total Value of Exposure in a Particular
Capital at Current Market Stock Under a Particular
Prices Category
A 75%= Tk. 3750 crore 0.1%= Tk. 3.75 crore
B 1%= Tk. 50 crore 2%=Tk. 1 Crore
Z 0% 0%
Mutual Funds 10%= Tk. 500 crore 5%= Tk. 25 crore
Category N 2%= Tk. 100 crore (but 20%= Tk. 20 crore

Shares fundamentals should be
checked before making any
decision regarding shares of
this category)
IPOs 5%=Tk. 250 crore 100%= Tk. 250 crore
Government T- 5%=Tk. 250 crore 100%= Tk. 250 crore

bills, Various
Government
Schemes,
Government
Project
Financing, etc.
Cash 4%=Tk. 200 crore 100%= Tk. 200 crore
This is helpful for countering the natural negative effects only but another
phenomenon may rise to prevent which, strong surveillance by the regulators (long
before the inception of the fund) is necessary. As Bangladesh is a country where to
downgrade someone in politics, anti-parties can stoop into any level. Thus the
second kind of impact could rise in the following way:
Chart 4: Possible Negative Impact of BGD Fund
(manipulated)
To prevent this, strong inspection along with some investment guiding principles
are needed to be followed by the regulatory bodies as well as the sponsors of the
fund. Only then, the fund would be able to serve its purpose of making the market
move toward a sustainable steady point.
9.2 Effects of Demutualization

The decision of demutualization of the country’s premier bourse was taken on
February 235. This is regarded as the most effective step to prevent the possible
illegal and unethical practices by the exchange management. As it turns the
exchanges into public companies, it is expected to provide unbiased investor
friendly services since the management gets separated from the shareholders.
Morsy and Rwegasira (2010) have identified the benefits of demutualization in their
study titled “An Empirical Investigation of the Demutualization Impact” published on
the 40th issue of the International Research Journal of Finance and Economics. Both
35
http://www.newstoday.com.bd/index.php?option=details&news_id=19888&date=2011-02-11- accessed on 2
April, 2011
the Wilcoxon Signed Rank Test36 and the Proportion Tests were used by them to
figure out significant increases in the following parameters:
9.2.1 Total number of listed companies

Demutualization fuels increased investor confidence in the market which assures
the private firms of getting good value in the stock market. Thus more companies
bring more supplies and stimulate more transaction. The increased number of
transactions gives brokerage houses the opportunity to generate more fees revenue
as well as brings more turnover taxes to the government along with the increased
enlistment fees.
9.2.2 Domestic market capitalization

Increasing Market Prices motivate people to invest more and thus transaction
increases resulting in more brokerage fees and Govt. Turnover tax revenues.
9.2.3 New capital raised by shares

The increased supply through RPOs results in more turnovers and in turn, more
brokerage fees and more govt. turnover tax revenues, as well as more RPO Issuing
Fees revenues earned by the government.
9.2.4 Value of Transaction

Increased value of transaction increases the percentage revenues of the brokerage
houses as well as that of the government.
9.2.5 Turnover velocity

The increased velocity of turnovers increases the turnover fees earning velocity for
both brokerage houses and the government.
9.2.6 Market concentration of the largest companies

Demutualization increases the market concentration of the best shares causing
decreased transaction of bad shares which results in a decrease in the supply of
them and thus, improves the quality of the market.
36
Named after Frank Wilcoxon, the Wilcoxon Signed-Rank Test is a non-parametric statistical hypothesis test used
when comparing two related samples or repeated measurements on a single sample to assess whether their
population means differ. –as on http://en.wikipedia.org/wiki/Wilcoxon_signed-rank_test- accessed on 3 April, 2011
9.3 Report of the Probe Committee

On April 30, 2011, the probe committee’s report was made public. According to
their findings, a total of Tk. 20000 crore was swindled of which, Tk. 15000 crore was
siphoned out of the country. Following these, the intern highlights some more points
to ponder:
o The probe committee identified some manipulators who they suspect to have
“used” the loopholes of the governmental regulations in order to make abnormal
gains. This proves the inefficiency of Bangladeshi Laws a maximum of which are
just the same as they were during the British period making them highly
inconsistent with the modern age.
o The committee identified some manipulators who they suspect to have

“violated” the governmental regulations. But it is a matter of concern that the
government is going to remove their names before making the report public.
This proves serious lack of courage borne by the country leaders and indicates a
weak governmental system which can be easily influenced by outsiders
whenever there rises a solemn issue like this.
Thus, it is the laws which need to be tailored at first in order to prevent this kind of
catastrophe in future. Also, the country leaders must show more commitment to
their assigned works and, for the sake of the countrymen, should not fear any
outside threats no matter what happens. Nonetheless, they must ensure that
nobody in their personal contacts could reap any illegal benefit by misusing the
influence of their political identities.
9.4 A Beginner’s Toolkit

As the market is going through price corrections, this is the right time for beginning
stock market investments. The following process is developed by the intern as a
helping kit for the beginners to make good investment choices:
This portion was published in the Financial

Express on 30 March, 2011-
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Internship Paper- Spring 2011|1

Ms. Nusrat Jahan

Spring 2011 Internship Program

Independent University, Bangladesh.

Subject: Submission of Internship Report- Spring, 2011.

I look for your kind appreciation.

Tanzina Ahmed Choudhury

Nevertheless, I must acknowledge the continual support I got from my Internship

Also, I should express my gratitude to the following people for being so

1. Mr. Mohammed Nasir Uddin Chowdhury, CEO & Director, LBSL

2. Mr. Wali Ul Islam, Deputy Chief Executive Officer, LBSL

3. Mr. Mohammad Amir Hossain, DGM & Regional Chief, Chittagong

5. Mr. Mohammed Showkat Nazim, Manager & Branch In-Charge, LBSL,

7. Mr. Farhad Ahmed Chowdhury, In-Charge, Human Resource Department,

Indeed, I wish every success of LBSL in future.

My second objective was related to forming some predictions regarding the

The third objective forwarded to me included evaluating the reactions of LBSL

---Tanzina Ahmed Choudhury

1.1 Origin of the Report

This report is prepared to fulfill the internship requirement of Lanka Bangla

1.2 Background of the Internship

BBA 499 (Internship/Senior Project), being a mandatory course offered by the

1.3 The Accommodator- Lanka Bangla Securities Ltd.

Lanka Bangla Securities Limited (LBSL) is a subsidiary of Lanka Bangla Finance

To fulfill the accommodator requirement, the Intern feels happy to be chosen by

1.4 Objectives of the study

• To find out the causes of the recent capital market crisis.

• To figure out the consequent impact of this crisis in Bangladesh Economy.

o Literature Review: As the research was based upon a current and

o Observation: To get an on-location idea on capital markets, the researcher

o Disguised Interviews: While talking with investors, sensitive to talk about

2.1 Limitations of the study

• The questionnaire survey is regionally biased because it focuses only on the

• There is high degree of variations in the available market statistics produced by

3.0 POSSIBLE REASONS BEHIND THE CRISIS

o The share market bubble was created during 2003-04 as a consequence

o During late 2006-07, private banks went for an aggressive race of

only source of making profitable investments offering quick and high

3.2 Illustration of the Findings- Reasons Behind the Crisis

3.2.1 Growing number of new retail investors injecting fresh funds

The number of BO Accountholders increased tremendously making the figure reach

3.2.2 Institutional investors were reluctant to invest in the market

3.2.3 High investment withdrawal by commercial banks and NBFIs

3.2.4 Extraction of money from the investors by the Multilevel

3.2.5 Manipulating the loopholes of stock market related rules and

Though the current market situation portrays a high possibility of market

3.2.6 Frequent changes in decisions taken by SEC and Central Bank

3.2.7 BB measures (raising the CRR and SLR)

3.2.8 Increasing Call Money Rate

3.2.9 Spreading of various rumors among the retail investors

To get an even clearer view, we Figure 1: Rate of Inflation

During 2005-06 and 2006-07, 4

eventually jumped to 9.94%

From the theories, we

Figure 3: Market Capitalization and Issued Capital

40000 Market Capitalization(Crore Tk.)

was made in 2003 (the total 20000 IssuedCapital

75395 crore in 2007. People had

4.0 POSSIBLE IMPACT OF THE CRISIS ON THE

4.2 Decline in Government Tax Revenue from Dividends

4.3 Increasing Interest Rates

4.4 Rise in Capital Market Indexes

Figure 6: Possible Impact on the Macro