NSE Indicators Down On Impact Of Smart Money Exit, As Investors Await Q1 GDP, Inflation Data

The nation’s stock market on Wednesday extended it losing position on a strong volatility and mixed sentiment that signaled the gradual exit of smart money from the market as sell-offs in highly capitalized stocks continues on daily basis across different sectors.
This exit of smart money is despite the impressive Q1 earnings reports from these companies, forcing the All Share Index to open the day south, breaking down the psychological line of 41,000 mark, hitting an intraday low of 40,904.83 basis points. The composite NSE ASI however touched highs of 41,160.18bps to finally finish at 41,080.12bpbs while trying to break down the symmetrical triangle chart pattern and the 20-Day Moving Average which may usher in another correction wave.

Anyone that had observed this market well enough knows that the downtrend has lingered since hitting the January highs and repeatedly bounced off at the support levels. Following the various attempt to reverse up since last Friday, while the top of NSE’s short-term is increasingly becoming an intermediate term.

The exit of smart money and ongoing cautious trading is indicative of the fact that the downtrend is underway. In early trading at the mid-week, the NSE Index has traded above its 20-DMA but has not been able to break down below its downtrend.
The next few trading sessions would go a long way in helping to determine which way the market will ultimately break from this pattern.

Midweek’s market technicals were weak as volume traded was low in the midst of high selling pressure and negative market breadth. Still as a sign of the smart money exit, profit taking was high with selling volume at 69%, while buying pressure stood at 31% on a volume index of 0.87 of the day’s total transaction. The bear run continued on low volume of trade that reflected in the day’s money flow index which weakened to 64.68 points from previous day’s 70.80 points, another indication that funds are leaving the market- the impact smart money, with foreign investors stylishly selling down their positions.

Index and Market Cap
Benchmark Index shed 75.58bps to close at 41,080.12bps after opening at 41,155.80bps, representing a 0.18% decline on a relatively low volume that was lower than the previous day’s. Similarly, market capitalisation went down by N27.4bn to close at N14.88tr from the N14.91tr it opened, also representing 0.18% value loss that further deepened investors losing positions.

Wednesday’s downturn was driven by sell-offs in stocks like: Nigerian Breweries Guaranty Trust Bank, Unilever, UACN Property and UBA, which impacted negatively on the NSE’s Year-to-Date returns, dropping to 7.42%. Market capitalisation gains for the period stood at N1.28tr, representing 9.34% above the year’s opening value.

Mixed Sector Performance
The sectorial performance for the day was mixed as the NSE Industrial Goods and Insurance closed green due to price rally in Dangote Cement, CCNN, AXA Mansard and Linkage Assurance. NSE Oil/Gas was flat for the session, while NSE Banking and Consumer Goods closed red in seeming market reaction to the latest by Moody’s Investment Services released Wednesday morning showing that the Nigerian banking sector would be hampered by non-performing loan (NPL) growth (READ Further); and profit booking. Stocks prices that went north included: Nigerian Breweries, Unilever, Guaranty Trust Bank and UBA, among others

Market breadth was negative as decliners outnumbered advancers in the ratio of 27:22 to make two sessions of down market.
Market activities were mixed as volume went down by 39.5% to 341.06m share from the previous day’s 563.62m units, while value was up by 61.7% to N9.33bn from previous day’s N5.62bn.

Transaction volume was boosted by financial services stocks like Guaranty Trust Bank, Fidelity Bank, FBNH, UBA and Zenith Bank which witnessed increased trading to top the activity chart.
Veritas Kapital and CCNN were the best performing stocks as they topped the advancers’ table, gaining 5.7% and 4.9% respectively to close at N0.37 and N24 each. This was due to market sentiments and forces
On the flip side, Japual Oil and Cutix were the worst performing, after losing 8.3% and 5% respectively to close at N0.44 and N49 purely on profit taking.

Market Outlook
We expect a mixed performance on Thursday, with continued volatility and profit taking as investors reshuffle their portfolios along the line of companies that started the year with stronger numbers as shown in their Q1 financials. Added to this is the nation’s economic fundamentals that are becoming even more robust on a daily basis. The Q1 GDP and April inflation data is also expected to confirm the positive impact of monetary stimulus and favourable extraneous factors like the upswing in oil price, among other global events now closely under watch.

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.

Ambrose Omordion
CRO|Investdata Consulting Ltd
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