Blue-chips Propel NGSE Index Further, Amidst Month, Quarter-end Rebalancing

Market Update for March 25

The Nigerian Stock Exchange (NSE) continued its uptrend on Thursday with the composite All-Share index closing higher, thereby extending the bull transition for the second successive session at the peak of earnings reporting season.

Money flow index revealed the entrance of the funds into equity space as corporate actions and high dividend yields continue to attract demand for blue-chip stocks and high cap equities in hot sectors with strong potential to grow sales in the current financial year as events in the economy unfold.

The NSE index action broke out the 39,000 mark to trade above the shortest moving averages of 7, 14 and 20, confirming a short rebound in the midst of positive dividend news, despite the rising yield in the fixed income market to support the recovery move. This is likely to linger for some time and trigger a major breakout in April, depending however on the Q1 corporate earnings and economic data in Q2.

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As strength returns to the market on the back of few earnings released ahead of the deadline, we are of the opinion that the ongoing season, helped by the unchanged interest rates, might support the new recovery move by the market. Consequently, investors seeking to preserve their capital and even profit from the ongoing recovery should play fundamentally sound stocks selling at a high margin of safety.  This is the time to adopt value and growth investing.

Thursday’s trading started on the upside and it was sustained for the rest of the session on buying interests on high cap and blue chip stocks that pushed the NSE index to an intraday high of 39,293.14 basis points where it closed, from its lows of 39,085.78bps on a low traded volume.

Market technicals for the day were positive and mixed, with volume traded lower than previous day’s in the midst of breadth favoring the bulls on a high buying pressure as revealed by Investdata’s Sentiments Report showing 100% ‘buy’ volume. Total transaction volume index stood at 0.62 points, just as momentum behind the day’s performance became relatively strong, with Money Flow Index looking up sharply at 62.93pts, from the previous day’s 54.65pts, indicating that funds entered the market.

Index and Market Caps

The benchmark index, at the end of the day’s trading gained 207.36bps, closing at 39,293.14bps after opening at 39,086.78bps, representing a 0.53% up. Similarly, market capitalization rose by N108.5bn, closing at N20.56tr, from previous day’s N20.45tr, which also represented 0.53% appreciation in value.

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The session’s upturn was again impacted by position taking in MTNN, StanbicIBTC, as well as UACN, Lafarge Africa, Guaranty Trust Bank, and Access Bank, among others. This impacted positively on Year-To-Date loss, which reduced to 2.43%, just as market capitalization loss dropped to N498.39bn, or 2.37% below its opening value for the year.

Mixed Sector Indices

Performance indexes across the sectors were mixed, as the NSE Consumer Goods and Energy closed 0.24% and 0.05% lower respectively, while the NSE Insurance index led the advancers gaining 0.81%, followed by Banking and Industrial goods with 0.60% and 0.07% respectively higher.

Market breadth turned positive, as advancers outnumbered decliners in the ratio of 23:12; just as activities in volume and value were down after traders exchanged 229.4m shares worth N3.78bn.

Coronation Insurance and Pharmdeko were the best performing stocks, gaining 10% and 9.63% respectively, closing at N0.55 and N1.48 per share respectively on audited earnings expectation. On the flip side, Sovereign Trust Insurance and NPF Microfinance lost 8.33% and 7.22% respectively, closing at N0.22 and N1.80 per share, on profit taking.

Market Outlook

We expect the mixed trend to continue as more corporate earnings hit the market in the face of rising dividend and fixed income market yields, as well as a trigger from the outcome of f MPC meeting during this earnings season and month/quarter activities. Also, the pullbacks offer bargain hunters and income investors another opportunity to reposition in high dividend yields and undervalued stocks, while more companies release their full-year numbers to support recovery. This is based on the fact that the rising fixed income yields may not be enough to scare all investors away from the equity market.

Again, the way to go is: Target dividend-paying stocks and fundamentally sound companies with growth prospects in 2021, looking the way of mispriced equities. This is especially given the rising oil prices that have so far supported the economy and equity market, despite the seeming improvement in the fixed income yield which had remained at negative real rate of return due to the subsisting high inflation.

However, the strong and faster recovery may continue, depending on market forces, going forward, as propelled by 2020 full numbers and expected 2021 Q1 earnings reports, until the next MPC meeting in May.

The NSE’s index action and indicators are heading in the same direction   on a low traded volume and positive buying sentiments in the midst of rising yield in bond and TB.

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https://investdata.com.ng/blue-chips-propel-ngse-index-further-amidst-month-quarter-end-rebalancing/