The slide witnessed in the stock market this week should not give investors cause to worry, analysts have said.

The market capitalisation of listed equities of the Nigerian Stock Exchange had depreciated by N134bn between Monday and Wednesday, opening at N8.698tn on Monday and closing at N8.565tn on Wednesday. The NSE All Share Index also fell from the 27,296.35 basis points it opened at on Monday to close at 26,876.07 on Wednesday.

But analysts insist the drop is not alarming, advising investors not to panic.

“I don’t think there is any cause for concern because despite the fact that the market lost substantially for days running, we still have some stock that gained weight,” Executive Director of Pivot Trust and Investment Company Limited, Mr. Jire Oyewale, said.

He explained that after months of significant increases in share prices, a drop was likely to occur.

Oyewale said, “Normally, when the market gains continuously, you expect this type of pull out; some investors will take profit.”

He stressed, however, that the fall was not solely caused by profit-taking activities, saying the Sallah break may also have contributed because “when people go on such holidays, they will need money to spend”.

The Chief Executive Officer of Lambart Trust and Investment Limited, Mr. David Adonri, also stressed that though the market was only experiencing some fatigue, nothing unusual.

He said, “The market may be coming down but it is not indicative that the market is not really active. It’s just that we have more sellers than buyers.  We are actually in a normal market situation, whereby occasionally you see more sellers selling than people who are buying. Then, when the prices are driven down to levels where investors see opportunities in the market, they start coming in again. And that stimulate a higher demand which takes the prices up again.

Though he said the fall was not unusual, Oyewale admitted that that it could have an effect on investors in the short term.

He said, “When the market is having this kind of trend, there is the tendency for some people that want to invest to relax a bit believing that they could get what they wanted to buy at a cheaper rate. This would contribute to less trading and subsequently prevent the market from being upbeat”.

Oyewale, however, explained that the development would not affect investor confidence “because the pull-out is not a major one”.

“People are taking profit temporarily for one thing or the other with the aim of reinvesting at a later date,” he said.

According to Adonri, rather than being negative, the development is good for the market.

He said, “Generally, the equities market thrives on a little volatility.

“When a market is only in one direction, that is appreciative, it is a dangerous development which ultimately can lead to overheating that could cause the market to plunge very bad like we saw in the past which could damage investor confidence. So the level where are now is actually the best to preserve investors’ confidence.”

Source: Punch (written by Simon Ejembi)