Equities market to sustain downward trend as profit-taking persists

By Chioma Obinagwam

Equities listed on the Nigerian Stock Exchange (NSE) will continue to tilt downwards in the current week. Confiance News gathered from analysts at Afrivinvest Research and Cordros Research at the weekend.

Confiance News recalls that the All-Share Index for the week ended March 12, 2021 dipped by 1.7 percent to close at 38,648.48 points.
All Share index tracks the general market movement of all listed equities on the Exchange, including the Alternative Securities Market (ASeM) regardless of their capitalisation.

Also, volume and value of stocks traded in the period under review closed in the negative territory, declining by 22.6 percent and 30.7 percent, respectively.

Analysts at Afrivinvest Research attribute the decline to profit-taking.

According to Wikipedia, profit taking is the practice of selling an asset, mostly shares, when the asset has risen in price. It normally causes the price of the asset in question to fall temporarily.

“The sell-offs experienced in the local bourse so far can be attributed to profit-taking in stocks that had rallied significantly before the beginning of the earnings season,” Afrinvest Research explained.

The effect of the profit taking is expected to filter into the current week as investors jostle to sell their shares.

According to Cordros Research, “We expect the choppy theme that played out this week to persist in the week ahead as investors continue to cherry-pick dividend-paying stocks and, at the same time, exhibit reluctance in leaving gains in the market.”

“With uncertainties about the direction of yields in the FI market still bugging investors’ minds, the bears are likely to retain dominance in the market. Notwithstanding, we advise investors to take positions in only fundamentally justified stocks as the unimpressive macro story remains a significant headwind for corporate earnings,” it continued.

Corroborating, Afrinvest Research said,”With investors leaning towards the fixed income space, sentiment is expected to remain bearish in the near term. However, we believe this presents investors with attractive entry opportunities in the equities market.”