The stock market ended last week on a sour note since the previous week’s strong sentiments could not be maintained.
Profit-taking by some investors in blue-chip equities, particularly in the banking and consumer goods industries, triggered the sell-off.
As a result, the Nigerian Exchange(NGX) Limited All-Share Index (ASI), which had gained 1.47 per cent two weeks prior, lost 0.57 per cent to settle at 37,994.19, while the market capitalization fell N123.7 billion to N19.796 trillion.
According to InvestData Consulting experts, the pause in momentum or correction has created opportunities for discriminating investors to reposition in interim dividend-generating equities. Profit-taking is an important aspect of stock market dynamics at any time, according to analysts, since it drives oscillation, which creates room for entry and exit.
“So investors and traders should not be carried away with any rally or rebound, but be guided by their investment objectives, while taking profit immediately reasonable profit targets are met (say 15-20 per cent) while keeping an eye on the preset stop-loss,” they said.
The analysts noted that they predict a mixed trend on profit-taking and repositioning as the half-year earnings reporting season gets underway soon after forming a wave that supports an uptrend as bargain hunters take advantage of pullbacks to reposition ahead of the second quarter (Q2) data.
“Again, the way to go in 2021 is to select dividend-paying stocks and fundamentally good companies with growth prospects, hunting for mispriced equities ahead of the interim dividend announcement,” InvestData stated.
This is especially true considering that, despite appearances to the contrary, fixed-income yields continue to deliver a negative real rate of return due to soaring inflation.
“However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by expected Q2 earnings reports, until the next Monetary Policy Committee (MPC) meeting in the coming weeks.”
Analysts at Cordros Securities also commented on the market’s prognosis for this week, saying that with the moderation in bellwether stock prices last week, they expect knowledgeable investors to take advantage of this and re-enter ahead of their H1-21 results report.
“However, we do not rule out the possibility of continued profit-taking activities. As a result, we think the local bourse will likely exhibit a zig-zag pattern. Therefore, we advise investors to take positions in only fundamentally justified stocks,” they said.
Meanwhile, investors traded 1.348 billion shares for N12.140 billion in 21,581 transactions, compared to 1.021 billion shares worth N14.145 billion in 17,565 transactions the previous week.
However, the Financial Services Industry topped the activity chart, with 892.212 million shares worth N7.065 billion traded in 11,592 transactions Profit-taking on, accounting for 66.2 per cent of the total stock turnover volume and 58.2 per cent of total equity turnover value. The ICT sector came in second, with 110.067 million shares worth N776.402 million traded in 744 transactions. Conglomerates Industry came in third with a turnover of 100.008 million shares worth N216.504 million in 788 transactions.
According to the price movement chart, 44 equities advanced in price this week, compared to 43 the week before, while 22 equities sank in price, compared to 26 the week before.
Redstar Express Plc led the price losses with 15.2 per cent, followed by Eterna Plc with 14.8 per cent. UPDC Plc topped the price gainers with 40.7 per cent, followed by Cutix Plc with 21%.