The current declining rate in the fixed income market would likely act as a booster to the equities section of the Nigerian capital market, analysts have said.

The analysts said that it was usually common for activities to increase in the equities section of the Nigerian Stock Exchange when the rates in the fixed income market recorded a decline.

According to them, investors, who usually stay in markets where they hope to make maximal gains, usually switch to the equities market when the rates in the fixed income market are low.

For the most part of this month, activities in the equities market had been recording a downturn, with the major market indicators closing on a negative note.

However, the negative run observed on the NSE’s All-Share Index in the past two trading weeks came to a halt, as gains in the industrial goods and financial services sectors moved the NSE ASI up.

Specifically, the NSE Index, which opened the week at 23,141.08 basis points, appreciated by 1.12 per cent to close on Friday at 23,399.58 points.

Similarly, the market capitalisation of the listed equities, which opened at N7.37tn rose by 1.12 per cent to close at N7.45tn.

Analysts said that the upbeat recorded in the last few days would likely continue into the coming week on the back of declining rates.

In their weekly report on Friday, analysts from Meristem Nigeria Limited, said, “The Index returned a positive 1.12 per cent after two weeks of depressing performances (1.21 per cent and 0.42 per cent respectively). With the positive rally in the last trading day, year-to-date return rose by 124 basis points to peg at 12.87 per cent this week.

“Therefore, we see market activities in the coming week being further buoyed by the bulls on the back of declining rates in the fixed income market.’

Explaining further, the analysts said, “With no primary auctions coming up next week, we expect rates to further decline slightly as demand pressure continues to pull rates down, and this would be a plus for the equities market.”

In their report, analysts from Vetiva Capital Management Limited noted that activities in the equities market was impressive last week, considering the two-day break for the Sallah holidays.

They noted that the trend was likely to continue this week.

They said, “The bearish trend observed in the market in the past two trading weeks changed as the index closed positive. Surprisingly, reflecting the strength of investor disposition, activity level improved with an average daily turnover of N3.30bn, a 126 per cent upswing relative to the figure the previous week at N1.46bn.

“The intensity of trade traffic is impressive, especially considering that activities on the floor were closed due to the two-day public holiday.

Source: Punch/Udeme Ekwere