Stock Market Reverses Gains as Investors Book Profits

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The stock market closed last week on negative note as the positive sentiments of the previous week could not be sustained.

The pullback followed profit-taking in blue-chip stocks, especially in banking and consumer goods sectors by some investors.

As a result, the Nigerian Exchange(NGX) Limited All-Share Index (ASI), which appreciated by 1.47 per cent two weeks ago, fell 0.57 per cent to close at 37,994.19, while market capitalisation shed N123.7 billion to be at N19.796 trillion last week.

However, the slowdown in momentum or correction, according to the analysts at InvestData Consulting, has created opportunities, for discerning investors to reposition in interim dividend paying stocks.
The analysts said there was no need to panic at this point because profit-taking is an integral part of stock market dynamics anytime, to drive oscillation that 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 added that they expect a mixed trend, on profit-taking and repositioning for half-year earnings reporting season kicking off any time soon after forming a wave that supports an uptrend as bargain hunters take advantage of pullbacks to reposition ahead of second quarter (Q2) numbers.

Looking ahead, InvestData said: “Again, the way to go is target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities ahead of interim dividend announcement. “This is especially given that despite the seeming improvements, fixed income yield continues to offer a negative real rate of return due to the galloping 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.”
Also commenting on the outlook for the market this week, analysts at Cordros Securities said with the moderation in the prices of bellwether stocks last week, they expected savvy investors to take advantage of this and make re-entry ahead of their H1-21 earnings announcement.

“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 worth N12.140 billion in 21,581 deals were traded as against 1.021 billion shares valued at N14.145 billion that exchanged hands last week in 17,565 deals the previous week.
However, the Financial Services Industry led the activity chart with 892.212 million shares valued at N7.065 billion traded in 11,592 deals, thus contributing 66.2 per cent and 58.2 per cent to the total equity turnover volume and value respectively. The ICT Industry followed with 110.067 million shares worth N776.402 million in 744 deals. The third place was Conglomerates Industry, with a turnover of 100.008 million shares worth N216.504 million in 788 deals.

A look at the price movement chart showed that 44 equities appreciated in price during the week, higher than 43 in the previous week, 22 equities depreciated in price lower than 26 equities in the previous week.
UPDC Plc led the price gainers with 40.7 per cent, trailed by Cutix Plc with 21 per cent, while Redstar Express Plc led the price losers with 15.2 per cent, followed by Eterna Plc with 14.8 per cent.

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