The Nigerian Exchange Limited (NGX) ended trading for August on a downturn as investors lost N587 billion in the value of listed equities, following sustained profit-taking and a shift in investor attention towards the fixed-income market.

Market capitalisation, which stood at N158.326 trillion at the end of trading on July 31, dropped to N157.739 trillion on August 31, representing a loss of N587 billion.

Similarly, the NGX All-Share Index (ASI), which measures the overall performance of listed equities, fell from 245,283.68 points to 244,199.39 points, representing a decline of 1,084.29 points or 0.44 per cent during the month.

The August decline came after the equities market had recorded a strong rally for much of the year, pushing the NGX to record N160 trillion levels and making it one of the best-performing stock markets globally.

Operators said the strong gains recorded by investors in previous months encouraged profit-taking, especially in highly capitalised stocks, as investors leveraged capital appreciation to recoup their investment.

The Central Bank of Nigeria (CBN) revised its Open Market Operations (OMO) framework, allowing individuals, corporates and non-bank financial institutions to participate more actively in the market.

The development increased the attractiveness of fixed-income instruments and created stronger competition for funds that would otherwise have flowed into equities.

During the period, sell-offs in some major stocks contributed to the market’s bearish performance. Earlier in the month, declines in highly capitalised companies added to the pressure on the benchmark index as investors took profits after the market’s record run.

The bearish sentiment persisted for several trading sessions, leading to a major correction in the market and eroding part of the gains recorded since the beginning of the year.

Head Research, Cowry Asset Management, Charles Abuede, said the Nigerian equities market is expected to maintain a cautiously positive outlook in the coming week.

According to him, the confirmation of Nigeria’s reclassification by FTSE Russell from an Unclassified to a Frontier Market represents an important medium-term catalyst that can further strengthen investor confidence ahead of the country’s return to the Frontier Market universe this month.

However, he noted that the market’s strong year-to-date return of 55.06 per cent, coupled with weak market breadth and declining trading activity, suggests that investors are becoming increasingly selective and more sensitive to stock valuations.

He pointed out that while the near-term direction of the market is likely to remain positive, the gains might not be broad-based, as investors focus more on fundamentally strong companies and stocks considered relatively undervalued.

Abuede said the market was, therefore, likely to record mixed and selective performance in the coming sessions, with investors expected to position in counters with strong fundamentals and attractive valuations.

He added that sustained interest in the banking, oil and gas as well as commodity sectors could provide support for the market, while the FTSE Russell reclassification may serve as a catalyst for improved investor confidence and increased international interest in Nigerian equities.