August 2, 2024/CSL Research
In sync with the bullish sentiments which prevailed the global equities market (except China) and the African market, the domestic equities market started the year on a positive note with the bulls wielding the upper hand. The market rallied for 15-trading sessions consecutively in January and closed the month above 100,000 points returning 33.1%. The NSE All-Share Index peaked at 105,722.80 (the highest in history) on 16 February 2024. Performance waned in the subsequent months after CBN hiked the MPR, making risk-free assets attractive to investors and after the announcement of banks’ recapitalization exercise.
In July 2024, the local stock market experienced a bearish trend, marked by consistent selling pressure throughout the month. This downturn resulted in a decline in the market’s overall value, indicating a loss of investor confidence in the equity market’s short-term prospects. While all sub-indices remained bearish, the Oil and Gas sub-index was the only one to post positive returns in the month. The market’s underperformance was driven by prevailing macroeconomic challenges, which continues to dampen investor sentiment. Additionally, the announcement by the Federal Ministry of Finance regarding a proposed windfall tax on banks led to a sell-off in banking stocks. As a result, the market closed at 97,774.22 points at the end of July, down 228 basis points (bps) from the opening level of 100,057.49 points at the start of the month.
The equities market is expected to close 2024 on a positive note but we remain cautious about the potential for significantly better performance in the second half of the year. Though we expect moderate recovery from current levels, we believe tight system liquidity will continue to undermine market performance. Apart from corporate actions and announcements, we do not foresee significant drivers of market performance in the latter half of the year, as we do not anticipate a sharp decline in fixed income rates and foreign portfolio investors remain cautious.
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