Analysts are projecting a potential pullback in the Nigerian stock market as investors gained a staggering N6.29 trillion in market capitalization within the last week. The Nigerian Exchange (NGX) experienced a significant 13.84% week-on-week gain, closing at 94,538.12.
Experts, however, express concerns about the sustainability of the bullish run, citing that the market might have entered the overbought region. Cowry Asset Management Limited analysts suggest that the current movement pattern of the All-Share Index (ASI) signals an impending pullback, indicating the need for a correction in the short term.
David Adonri, Executive Vice Chairman of Highcap Securities, echoes these sentiments, emphasizing that the market’s upward trend appears to be more sentiment-driven than grounded in strong economic fundamentals. He raises the possibility of a correction when economic realities, such as dividend payouts falling below expectations, become apparent.
Adding to the discussion, Akeem Oyewale, Managing Director of Marble Capital, notes that a more realistic view of whether the market is in the overbought region will emerge as the audited financials of listed firms are published in the coming weeks. He acknowledges the role of both rational investor behavior and sentimental views in driving market performances.
Rotimi Olubi, MD of ARM Securities Limited, aligns with the belief that the market is in the overbought region and anticipates an imminent pullback. However, he sees this potential correction as an opportunity for smart investors to re-enter the market.
Despite concerns about a pullback, last week’s bullish momentum was fueled by buying interest in bellwether stocks and those with strong fundamentals. The industrial index outperformed others, rising by 46.88%, driven by price increases and buy interest in cement firms like Dangote Cement, BUA Cement, and Lafarge Africa.
While various sectors experienced positive gains, the banking index retreated slightly due to price declines in FBN Holdings, Guaranty Trust Holding Company Plc, and Stanbic IBTC. Despite the positive performance, participation levels weakened, with total traded volume, number of trades, and weekly traded value showing declines compared to the previous week. Transnational Corporation Plc, Jaiz Bank Plc, and AIICO Insurance Plc were among the top-performing equities during the week.
