NSE Index Closes Green Amid Bargain Hunting, Portfolio Realignments

The Nigerian stock market on Tuesday continued along its volatility wave on improved sentiment, as low valuations in the market continue to inspire portfolio realignments and attract bargain hunters. Such value investors are repositioning ahead of Q1 scorecards and economic data.
Such portfolio realignments and bargain hunters halted the southward movement, as the index tries to form a strong support level at 40,000 mark. This will however depend on whether the expected Q1 earnings season and economic data indeed make any meaningful impact this time around, even as investors and traders change strategies ahead of the 2019 general election.
The NSE index had a slight improvement at the end of the day, after gapping down from the day’s opening level, a situation that was sustained as it hit a low of 40,206.10 by midday, before retracing up in the afternoon to intraday highs of 40,499.04bps after successfully retesting the previous day support. When support held, the index rallied sharply in the afternoon, and ran to key overhead resistance near the declining tops line for the current down channels.

The candlestick formation at the end of Tuesday’s trading session supports reversal depending on market forces on Wednesday morning as market opens. The index is resisting to breakdown the lower line of the bearish channel on a low traded volume with strong buying pressure of 100%. The recent movement of oil price to breakout its 52-week high as looming trade war between China and U.S subsides should trigger inflow that will further strengthen Nigeria’s external reserves and boost the investment environment.

Market technicals on Tuesday were strong but mixed as volume traded was low on a strong buying pressure of 100%, while market breadth was negative despite the improved sentiment recorded as revealed by the selling volume of 0% on a volume index of 0.88 of the day’s total transaction. Money flow index is gradually looking down at 39.81 points from the previous day’s position of 40.14points.
Liquidity in the market remains weak as institutional inflow to the market is low.

Index and Market Cap

The benchmark NSE All-Share index gained a marginal 69.86 points, closing at 40.499.04 basis points after opening at 40,429.18bp, representing a 0.17% growth on a low volume that was higher than the previous day’s. Similarly, market capitalisation for the day was up by N25.23bn to close at N14.63tr from an opening value of N14.6tr, also representing 0.17% value gain.

The market upturn was attributed to price appreciation of medium and high cap stocks, like Double One, Ecobank Transnational Incorporated, Dangote Flour, Dangote Sugar, Flour Mills and Dangote Cement. This impacted positively on the NSE’s Year-To-Date returns, raising it to 5.90%, just as market capitalisation gains for the period stood at N1.03tr, representing 7.49% above the year’s opening value.

Mixed Sectoral Indices

Sectoral performance for the day was mixed as the NSE Industrial and NSE Consumer Goods were in the green, driven by Dangote Cement, International Brewery, Dangote Sugar and Dangote Flour while NSE Banking and others closed red.
Market breadth for the day was negative as decliners outweighed advancers in the ratio of 26:16 to halt the bearish transition.
Market activities were mixed as volume was up by 35.3% to 388.28m shares from the previous day’s 287.04m units, while value dropped by 14.3% to N4.21bn from Monday N4.95bn.
Transaction volume was boosted by financial services and consumer goods stocks like Sovereign Insurance, Zenith Bank, Skye Bank, Flourmills and Access Bank which witnessed increased trading to top the activity chart.
Japaul Oil and Double One were the best performers for the day to topped the advancers’ table after gaining 8.16% and 5% respectively to close at N0.53 and N178.50 each. This was due to market forces and sentiment for dividend.
On the flip side, Wema Bank and Lasaco were the worst performing, after losing 4.94% and 4.88% to close at N0.77 and N0.41 respectively on profit taking.

Market Outlook
We expect rebound gong by the candlestick formation and market forces amidst continued volatility and portfolio realignments, as low stock prices continue to attract bargain hunters repositioning ahead of Q1 scorecards and economic data. Even so, value investors continue to position for the short and long-term on the strength of company fundamentals.
However, we would like to reiterate that investors should not panic but go for equities with intrinsic value, especially during this season when dividend payment is ongoing and Q1 results are expected in the market arena.
We advise investors to allow numbers guide their decisions while repositioning in any stock, especially now that stock prices remain volatile amidst improving company, economic and market fundamentals.
It is time to combine fundamentals and technical tools to take decision by knowing the support and resistant level to reposition or exit any position. A stock market is in cycles. You must know the cycle it, or particular stocks therein are to successfully manage your trading and investment risk. For stocks that should be on your shopping list to buy in these seasonal changes as the year unfolds, sign up to INVESTDATA BUY AND SELL signal setup by calling 08032055467.
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Ambrose Omordion
CRO|Investdata Consulting Ltd
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