The equities section of the Nigerian Stock Exchange may not record significant increase this week, capital market analysts have said.

This prediction was based on the fact that there is a huge possibility of profit-taking by investors, who would want to cash in on the gains in stock prices.

According to them, with the significant profit garnered in the stock market within the last few months, it is only natural for the appetite of investors’, who have waited for increase in prices of stocks, to be aroused.

They said that the appreciation in the market had been significant, with major market indicators rising to 32 per cent, almost double the 16.3 per cent loss, recorded at the end of equity trading activities in 2011.

They also noted that already this was visible as the market recorded pockets of profit taking earlier this month, with major market indicators closing lower.

Analysts from Vetiva Capital Market Limited, said in their report for the week ended October 19, 2012, that the gains in the market was not likely to be sustained as investors would take advantage of the significant price appreciation, especially in the shares of the multinational companies.

They said, “Equities recorded another week–on–week appreciation amid a full swing in the third quarter 2012 earnings season. The shares of Industrial Goods companies, which gained 89 basis points led the gainers chart while conglomerates sector followed. Thus the NSE All-Share Index was up by 0.03 per cent for the week.

“Our expectation, therefore, is that profit-taking will dominate equities in the coming week, as a number of stocks remain under pressure from sellers following recent gains.

The analysts, however, stated that the continuous release of third quarter results by major companies would likely tame the losses expected from the sell pressure, adding, however, that good third quarter results should help cushion the downside.

At the close of trading activities on Friday, the market capitalisation of the listed equities closed at N8.698trn, representing a rise by N7bn or 0.81 per cent from N8.628trn recorded at the beginning of the week.

The NSE All-Share Index also rose by 0.81 per cent or 218.69 basis points to close on Friday, at 27,296.35 points, up from 27,077.66 points recorded the previous week.

In their report, analysts from Meristem Nigeria Limited, said, “Activities on the trading floor declined towards the end of the week. The total volume and value of transactions declined by 14.90 per cent and 6.50 per cent compared to the previous week.

“Our investment theme this quarter still maintains caution on the part of the investors as the Q3 rally has already pushed prices close to their fair value estimates.”

Source: Punch (written by Udeme Ekwere)