Stock Market Downturn Wipes N5.64tn Off NGX Capitalisation

………. Experts Attribute Decline To Portfolio Rebalancing

Investors on the Nigerian Exchange (NGX) suffered a massive loss of N5.64tn in market value within one week as a wave of profit-taking and weakening investor sentiment triggered a broad-based sell-off across major sectors of the equities market.

The downturn effectively halted the bullish momentum that had driven the market to record highs in recent weeks, with analysts attributing the decline to investors cashing in on earlier gains and repositioning their portfolios amid attractive fixed-income yields and prevailing macroeconomic uncertainties.

Data reviewed by THE WHISTLER showed that the benchmark NGX All-Share Index (ASI) declined by 3.59 per cent week-on-week, closing at 235,941.27 points from 244,738.74 points recorded at the beginning of the trading week.

Similarly, market capitalisation dropped by N5.64tn to close at N151.33tn, reflecting the sharp erosion in equity values across the market.

The decline also moderated the market’s year-to-date return to 51.62 per cent, underscoring a slowdown in investor confidence after months of sustained gains.

Market analysts said the correction was largely expected following the strong rally witnessed in recent months, particularly in banking and consumer goods stocks that had attracted significant investor inflows.

Speaking exclusively with THE WHISTLER, the Group Managing Director of Crane Securities Limited, Mr. Mike Eze, described the development as a healthy market correction rather than a reversal of the broader bullish trend.

“What investors are witnessing is largely a market correction after an extended period of strong gains,” Eze said.

“The Nigerian equities market had recorded exceptional returns over the past several months, making profit-taking inevitable. While the N5.64tn decline appears significant, investors should view it within the context of the market’s impressive year-to-date performance, which remains above 50 per cent.”

According to him, the sustainability of current market valuations will depend largely on corporate earnings performance and broader macroeconomic fundamentals.

“The recent sell-off should not necessarily be interpreted as a reversal of the market’s long-term bullish trend. Corrections are healthy because they help moderate excessive valuations and create new entry opportunities for investors with longer investment horizons.

“Banking, consumer goods and other fundamentally strong sectors still possess growth potential, particularly if companies continue to deliver robust earnings and the broader economy maintains its recovery trajectory,” he added.

Also commenting on the market decline, financial analyst Mr. Femi Lawal said the sell-off reflected more than profit-taking, noting that investors were increasingly reassessing risk assets amid elevated interest rates and tightening liquidity conditions.

“Fixed-income instruments are currently offering attractive yields, prompting some institutional investors to rebalance their portfolios away from equities,” Lawal said.

“The sharp decline in market breadth, with 78 losers against only 16 gainers, suggests that sentiment has weakened considerably and investors are becoming more selective in their stock picks.”

The negative sentiment was evident across trading statistics for the week.

Market breadth closed significantly negative at 0.21x, with only 11 stocks recording price appreciation compared to 78 decliners, while 57 equities closed unchanged.

The widespread losses highlighted the extent of the bearish sentiment, as investors exited positions across several sectors.

Despite the market decline, trading activity presented mixed signals. While total trading volume fell by 38.04 per cent week-on-week, both transaction value and the number of deals recorded notable increases.

A total of 3.08 billion shares valued at N254.79bn exchanged hands in 287,541 deals during the week, compared to 4.96 billion shares worth N207.52bn traded in 235,966 deals the previous week.

Analysts said the increase in transaction value despite lower volumes indicated selective participation by investors and strategic portfolio repositioning rather than widespread market abandonment.

Sectoral analysis showed that the Financial Services Industry maintained its dominance in market activity, accounting for 2.07 billion shares valued at N64.49bn traded in 121,981 deals.

The sector contributed 67.44 per cent and 25.33 per cent to total equity turnover volume and value respectively.

The Services Industry followed with 175.74 million shares worth N2.76bn traded in 19,590 deals, while the Consumer Goods Industry recorded 133.38 million shares valued at N12.68bn in 30,730 deals.

Further analysis showed that Access Holdings Plc, Sterling Financial Holdings Company Plc and Jaiz Bank Plc emerged as the most actively traded equities by volume.

Together, the three stocks accounted for 819.23 million shares valued at N12.25bn in 21,809 deals, representing 26.64 per cent of total traded volume and 4.81 per cent of total traded value during the week.

Looking ahead, analysts at Cowry Asset Management Limited projected that the equities market may remain cautious in the near term as profit-taking activities and subdued investor sentiment continue to influence trading decisions.

However, the firm noted that selective bargain hunting in fundamentally strong stocks could provide support for the market, particularly as investors continue to monitor corporate earnings releases, monetary policy developments and key macroeconomic indicators for directional cues.

While the recent sell-off has erased trillions of naira in investor wealth, market experts maintain that the correction could ultimately strengthen the market by creating more attractive entry points and helping align stock valuations with underlying fundamentals.