Profit Booking Continues On NGSE, Amidst Cautious Trading, Month-end Positioning

Market Update for November 27
The nation’s stock market again closed lower at the midweek on an extension of profit booking and cautious trading by market players as the month of November draws to a close, slowing down the recent recovery moves. This was after the index broke out of the bearish zone on November 14 on renewed buying interest triggered by capital wave resulting from a recent drop in money market rates, and the slide in fixed income yield.
With stocks set for a recovery after this short correction, due to selloffs in medium and high cap stocks, and the impact of improved economic indices and increased liquidity flow to the real sector of the economy, valuations are still interesting as the market remains undervalued enough to attract inflows, despite the risk associated with the window. Low priced equities continue to dominate the top gainers. Despite being volatile, they are attractive for short-term profit trading. However, there is a need for serious caution.
Should you get trapped in any of the dividend paying stocks during this ongoing pullback, do not exit in a state of panic. Instead, be patient, and keep your gaze on the market trend.
Meanwhile, Wednesday’s trading opened slightly on the upside in the early hours of trading but pulled back between mid-morning and afternoon on profit-booking and selloffs. The losing momentum dragged the NSE index to an intraday low of 26,782.84 basis points, from its high of 26,893.84bps, before retracing up slightly to close the day lower at 26,790.10bps on a low traded volume.
Midweek’s market technicals were negative and mixed as volume traded was lower than the previous day, with breadth favouring the bears and high selling pressure as revealed by Investdata’s sentiment report of a 93% sell volume and 7% buy position. The day’s total transaction volume index stood at 0.60, even as the momentum behind the day’s performance inched up, with Money Flow Index reading 49.49 points, from the previous 49.14bps, indicating that funds entered some stocks, even as the market was down.

Index and Market Cap
The composite NSE All-Share Index, at the close of trading, shed 93.23bps, closing at 26,790.10bps from its 26,883.33bps opening, representing a 0.35% decline, just as market capitalization lost N45bn, closing at N12.93tr, from the opening value of N12.96tr, which also represented a 0.35% value loss.
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The session’s downturn was driven by profit-taking and selloffs in Dangote Cement, FBNH, UBA, Access Bank, Unilever, Dangote Sugar, UACN, Oando, and Wema. These impacted negatively on the NSE’s Year-to-Date loss, which increased to 14.76%, while market capitalization gain for the period dropped to N1.21tr, representing 10.32% growth from the year’s opening value of N11.72tr.

Bearish Sector Indices
All sectoral performance indexes were in red, except for the NSE Insurance index that closed higher with 0.54%, while the NSE Oil/Gas index led the decliners, after shedding 1.07%. It was followed by the NSE Banking which lost 0.49%, while the NSE Consumer and Industrial goods shed 0.20% and 0.08% respectively.
Market breadth was negative as decliners outnumbered advancers in the ratio of 26:19, while market activities were down in volume and value traded by 9.58% and 52.18% respectively to 189.86m shares worth N1.48bn from the previous day’s 209.97m units valued at N3.10bn. This volume was boosted by transactions in stocks like Transcorp Plc, Zenith Bank, Chams, Fidelity Bank and FBNH.
The best-performing stocks for the day were AG Leventis and Livestock Feeds that topped the advancers table, with gains of 10% each to close at N0.33 and N0.55 respectively, on the back of market sentiments for kobo stocks and market forces. More specifically, AG Leventis was boosted by position taking on the back of Monday’s decision at the extraordinary general meeting to up the payout to 70 kobo per share, up from 65 kobo earlier proposed. On the flip side, Consolidated Hallmark Insurance and Glaxosmith lost 10% and 9.52% respectively, closing at N0.36 and N5.70 on profit-taking and weak earnings.

Market Outlook
We expect the intraday oscillation to continue on profit-taking and interoperation of MPC outcome on the capital flow and repositioning in value stocks will persist. The changing sentiments in expectation of improved liquidity as interest rates drop in the money market had trigger buying interest in stocks regardless of a high risk that is associated with investing equity.
The current undervalued state of the market offers investors opportunities to position for short and medium-to-long-term views. We expect that investors would target fundamentally sound and dividend-paying stocks for possible capital appreciation as the year draws down.
Also, traders and investors need to change their trading strategies due to NSE’s pricing methodology, CBN directives and its impact on the economy in the nearest future, and another fiscal policy initiative that may provide liquidity for the economy and market.

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