Written by The Banking Post
Despite signs of slight upward movement in recent days, Bangladesh’s stock market has long suffered a bearish trend, leaving many investors facing significant losses. Due to prolonged underperformance, numerous company stocks remain undervalued — with the overall market also falling into a similar state. The Dhaka Stock Exchange’s (DSE) price-to-earnings (P/E) ratio has dropped below 9.5, reflecting the market’s current valuation level.
A P/E ratio is commonly used to assess investment risk in the stock market. Typically, a ratio between 10 and 15 is considered safe for investment. If a company’s P/E falls below 10, it suggests the stock is undervalued and may offer a favorable investment opportunity. Based on this metric, the present market condition appears highly suitable for cautious investment.
Market analysts note that the bearish phase stemmed from multiple factors, but signs of recovery are now evident. They suggest that investors who approach the market prudently and make decisions based on proper data analysis could earn healthy returns. Investing in fundamentally strong companies, with thorough review, is key to profitability.
Sector-Wise Valuation Insights
As of now, DSE’s overall P/E stands at 9.41. Several sectors show even lower ratios:
- Fuel & Power: Lowest at 5.74
- Banking: 5.85
- Service: 9.09
- Textile: 9.67
In contrast, the highest P/E is found in the Ceramics sector at 54.56, followed by Jute at 24.21. Other sectors remain below the 20 threshold:
| Sector | P/E Ratio |
|---|---|
| Cement | 10.08 |
| Pharmaceuticals | 10.32 |
| Engineering | 10.38 |
| Leather | 10.63 |
| Financial Institutions | 10.97 |
| Insurance | 11.40 |
| Food | 15.35 |
| IT | 15.49 |
| Miscellaneous | 15.89 |
| Travel | 16.98 |
| Telecom | 17.32 |
| Mutual Funds | 18.27 |
| Paper & Printing | 18.96 |
Expert Opinions
DSE Director Shakil Rizvi remarked, “While P/E ratio is an important tool for evaluating investment risk, it shouldn’t be the only one. When the P/E falls below 10, it’s generally a signal that the stock is a sound investment — but surrounding factors must also be considered.”
He added that the current market offers an opportune entry point for investors, with many stocks undervalued. Those who perform proper analysis and invest in quality companies could expect favorable returns.
DBA President Saiful Islam echoed the sentiment, noting, “The market is showing signs of recovery. We believe this momentum will continue.”
Asked what this optimism is based on, he said that election-related uncertainties have subsided, providing a clear political and electoral roadmap. Additionally, the government is taking proactive measures to support the stock market.
