The stock market took a sharp hit last week, with investors staring at a staggering N1.3 trillion loss.
This massive loss erases nearly half of the N11.1 trillion gained in July, leaving many investors wondering if the market is due for a correction. The Nigerian Exchange Limited (NGX) reported that the market capitalisation fell by N1.261 trillion, closing at N158.326 trillion compared to N159.587 trillion in the previous week.
Only 33 stocks advanced last week, a significant decline from the 57 that made it in the previous week, while 56 equities declined, up from 38 in the previous week. This indicates a stronger bearish sentiment in the market.
Analysts at InvestData Consulting Limited attributed the downturn largely to profit-taking in highly capitalised and actively traded stocks, especially within the banking sector. "The emergence of fresh 52-week lows amid the broader market decline suggests that some investors are becoming increasingly cautious about individual stocks, even as the overall NGX remains significantly higher on a year-to-date basis," the firm said.
The analysts expect cautious trading to persist in the near term. "The NGX enters the new trading week with a cautious short-term outlook following last week's broad-based selloff. Profit-taking is likely to remain a dominant feature of the market as investors continue to lock in gains from the strong rally recorded so far this year," they added.
Market breadth deteriorated during the week, with only 33 stocks advancing, down from 57 in the previous week, while 56 equities declined, compared with 38 losers a week earlier. A total of 58 stocks closed unchanged, up from 51 recorded previously.
The decline in the market follows renewed selling pressure across major banking, industrial, and consumer goods stocks as investors cashed in on the strong gains recorded in recent weeks.
Despite the weekly setback, the market still posted a robust monthly performance, with investors gaining N11.109 trillion in July. Market capitalisation climbed from N147.217 trillion at the end of June to N158.326 trillion by the close of July, underlining the strength of the rally before last week's correction.
The sharp monthly appreciation encouraged many investors to lock in profits, particularly in stocks that had recorded significant price gains.
In a conversation with Vanguard News, experts explained that the market's correction was a natural phenomenon, noting that investors are taking profits to avoid potential losses. According to them, the correction will not affect the overall growth of the market.
The NGX All-Share Index (ASI) declined by 0.83% to 245,283.68 points from 247,357.40 points, reflecting the broad-based weakness across the market.