The Nigerian Exchange (NGX) witnessed a deepening correction on Tuesday as investors continued to lock in gains following a record-breaking rally that had pushed the market to unprecedented highs. The All-Share Index (ASI) fell by 0.5% to close at 104,000 points, extending the downturn that began earlier in the week. Market capitalisation also dropped by N300 billion to settle at N59 trillion, reflecting the persistent profit-taking activity across major counters.
Profit-Taking Intensifies After Historic Rally
The correction comes after the NGX had surged to an all-time high of 105,000 points last week, driven by strong demand for banking and consumer goods stocks. However, analysts at Lagos-based investment firm Meristem Securities noted that the recent decline is a natural market adjustment following such an aggressive upward move. "The market is simply consolidating after a phenomenal run," the analysts said in a note to clients. "Investors are taking profits, and this is healthy for long-term sustainability."
Trading activity remained robust, with a total of 450 million shares exchanged in 8,000 deals, valued at N10 billion. Despite the bearish sentiment, some stocks bucked the trend, including Dangote Cement, which gained 1.2% to close at N400, and MTN Nigeria, which appreciated by 0.8% to N250. Conversely, heavyweights like Airtel Africa and BUA Foods led the decline, shedding 2.1% and 1.8% respectively.
Sectoral Performance Mixed Amid Sell-Off
The banking sector bore the brunt of the sell-off, with the NGX Banking Index dropping by 1.5% as investors offloaded shares in Zenith Bank, Guaranty Trust Holding Company (GTCO), and Access Holdings. The industrial goods index also fell by 0.9%, dragged down by losses in BUA Cement and Lafarge Africa. However, the oil and gas index posted a marginal gain of 0.3%, supported by buying interest in Seplat Energy and TotalEnergies.
Market breadth closed negative, with 28 stocks declining against 14 advancing. Among the top losers were FBN Holdings, which fell by 3.4% to N25, and UBA, which dropped by 2.7% to N30. On the flip side, Nestle Nigeria and International Breweries recorded gains of 2.5% and 1.9%, respectively, as investors sought refuge in defensive stocks.
Outlook: Analysts See Further Consolidation
Looking ahead, market watchers expect the correction to persist in the short term as investors continue to rebalance their portfolios. "We anticipate further profit-taking, especially in stocks that have appreciated significantly over the past month," said a senior analyst at CSL Stockbrokers. "However, the underlying fundamentals remain strong, and we could see renewed buying once valuations become more attractive."
The NGX's record run had been fueled by improved corporate earnings, positive macroeconomic data, and increased foreign portfolio inflows. However, the recent uptick in Treasury yields has made fixed-income instruments more appealing, prompting some investors to shift funds away from equities. This dynamic is likely to keep the market under pressure in the coming sessions, with the ASI expected to find support around the 102,000-point level.
As the correction unfolds, market participants are advised to focus on fundamentally sound stocks with strong earnings visibility, while keeping an eye on global oil prices and domestic policy developments that could influence investor sentiment.
