NGSE Index Returns 20.12% YTD, As Funds Flow Towards Sound, Dividend Stocks

Market Update for November 9

The nation’s equity market indexes, on Monday, closed higher in the aftermath of a surge in demand for high cap and dividend-paying stocks, driven specifically by buying interests in cement companies stocks which recently released impressive Q3 numbers. Also, investors positioned in banking stocks ahead of their scorecards release. All of these were helped by the inflow of funds from maturating OMO bills and other investment windows totaling N224bn to the equity space, especially blue-chip and growth stocks with a history of dividend payout.

The better-than-expected corporate earnings have equally fuelled positive sentiments as investors reposition their portfolio for year-end and 2021. Not forgetting that the market has suffered two years’ decline before this recent V shape rebound and recovery that started in April and had been disconnected from economic realities. The price appreciation of high cap stocks has support this rally and recovery. Investors should allow their investment objective to guide them and know when to take profit.

A good entry/exit strategy makes a successful trader or investor. Let support and resistance level guide your decision. As the outcome of the US presidential election and the good news that Pfizer’s new Covid 19 vaccine is in its late-stage trials appear to show 90% effective rates. These boosted confidence for a global and domestic economic recovery that impacted positively on stock markets globally.

Meanwhile, Monday’s trading started on the downside before rebounding sharply at mid-morning and was sustained throughout the day on buying interests, which pushed the composite index to breakout the 32,000 psychological line to an intra-day high of 32,243.05 basis points, from its low of 30, 733bps. Thereafter, it closed higher than its opening figure at 32,243.05bps on a very high traded volume.

Market technicals for the day were positive and strong, despite a slide in volume traded when compared to the previous session in the midst of breadth that favoured the bulls on a high buying pressure, as revealed by Investdata’s Sentiment Report showing 100% ‘buy’ volume. Total transaction volume index stood at 1.47 points, just as momentum behind the day’s performance remained strong, with Money Flow Index looking up at 94.55 points, from the previous day’s 94.14 points. This is an indication that funds entered high cap stocks, as well as the market in general.

Index and Market Caps

The key performance index, at the end of Monday’s trading gained a significant 1,226.88bps, closing at 32,243.05bps, representing a 4% growth after opening at 31,016.17bps, just as market capitalization soared by N641.08 billion to N16.85 trillion also representing a 4% appreciation in investors’ portfolios.

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The upturn was driven by price appreciation in large caps like Dangote Cement, MTNN, BUA Cement, Guaranty Trust Bank, Zenith Bank Lafarge Africa, Access Bank, and UBA, among others. This raised Year-To-Date gain to 20.12%, while Market capitalization YTD climbed N3.89tr up, representing a 30.02% above the year’s opening value.

Bullish Sector Indices

The performance indexes across the sectors were bullish, led by NSE Banking which gained 6.59%; followed by NSE Industrial goods, 5.54%; while Consumer goods, Insurance and Oil/Gas closed 1.78%, 1.57% and 0.98% higher respectively.

Market breadth was positive as advancers outweighed decliners in the ratio of 49:11, while activity in volume and value terms were mixed with traded volume slightly down by 0.23% to 636.01m shares, as against the previous day’s 637.49m units, while transaction value rose by 57.44% to N8.24bn from Friday’s N5.23bn. Volume was driven by trades in Zenith Bank, FBNH, Access Bank, UBA and Fidelity Bank.

Lafarge Africa and NNFM were the best performing stocks during the session after gaining 10% each, closing at N21.45 and N6.05 respectively, on impressive earnings and market forces. On the flip side, NCR and Learn Africa lost 10% and 8.7% respectively, closing at N1.80 and N1.05 respectively on market forces and unimpressive earnings.

Market Outlook

The market has broken out the 32,000 resistance level as predicted in our previous update, confirming the possibility of strong and faster recovery that signals a continuation of trend and profit booking to support this rally. Pullbacks and correction are underway to trigger mixed trend, as investors look to more the release of financials by the tier-1 banks, even as analyses of numbers released so far have helped reposition their portfolios on the strength of sector and company’s performances.

The NSE’s index action and indicators are looking up in the same direction on a very high traded volume and positive buying sentiments.

Again, the current undervalued state of the market offers investors opportunities to position for the short, medium and long-term, which is why investors should target fundamentally sound, and dividend-paying stocks for possible capital appreciation in the rest of the year.

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