Following the impressive second quarter results released by major companies in the financial sector, analysts have predicted strong rally in financial stocks.

The analysts based their prediction on the fact that some stocks in the sector were currently selling at very low prices, adding that investors would be attracted to those stocks thus boosting their prices.

They also added that the expectations of increased and better results at the end of the third quarter would also whet investors’ appetite, thus making them to leverage on those stocks.

The analysts noted that, already, the trend was visible in activities last week, as the Nigerian Stock Exchange Banking Index recorded a rise of 1.8 per cent or 6.16 basis points, from 348.35 points on Monday, to 354.51 points last Friday.

Thus, the market capitalisation of the listed equities rose by N70bn or 0.9 per cent from N7.417tn last Monday, to close at N7.487tn on Friday.

Similarly, the NSE All-Share Index gained 0.9 per cent or 220.94 basis points to close on Friday, at 23,523.16 points, up from 23,302.22 points at the beginning of the week, while the NSE-30 Index recorded a 1.4 per cent rise or 14.79 basis points to 1,098.24 points, up from 1,083.45 points on Monday.

In their report on Friday, analysts from Meristem Nigeria Limited noted that investors were likely to take position in the market ahead of expected strong gains in the market at the end of the third quarter.

They said, “After a breakout of the 21,200 support, prices have been appreciating, maintaining the trend on a 20-day moving average to find the next resistance from above 23,000 basis points. However, noticeable price fluctuations which occurred can be attributed to volatility based on market sentiments.

“We see a drift of the 10-moving day average forming around the 22,800 points. This is a clear reflection of the strategic positioning of investors to cash in on the gains of the market in the third quarter of the year.

“Thus, we opine that expectations of robust third- quarter earnings will propel investors to leverage on the positive pulse of the market this season; outlook on the market is premised on expectations of strong performances from major companies, already, some have started rolling in impressive results.”

The analysts also added, “We expect a strong rally in financial stocks also during this period; an effect of remarkable double digit figures being rolled out. We are of a strong opinion that the activities in the market may continue to look attractive, though we do not rule out investors taking profits.”

Analysts from Vetiva Capital Management Limited in their report, said, “On the home front, following the strong gain recorded in the week past, we think investors might be tempted to take profits in the week ahead, especially as the earnings season draws to a close.”

Source; Punch/Udeme Ekwere