What Stock Market Points Mean

Stock market points are used in the stock market as a measure for analysis and it is far from complex. Here's what it's really about

On the trading economics website, the summary of the Nigerian stock market growth rate reads:

*“The NSE-All Share decreased 4669 points or 15.03% since the beginning of 2019, according to trading on a contract for difference (CFD) that tracks this benchmark index from Nigeria. Historically, the Nigeria Stock Market NSE reached an all-time high of 66371.20 in March of 2008 and a record low of 4792.03 in September of 1999.”*

For the financial expert, this is a walkover. However, for the everyday individual or investor, it’s gibberish.

Stock market points are used in the stock market as a measure for analysis and it is far from complex. With stocks, one point is equal to a naira. As such, when a stock is said to have gained a point, it means it has gained a naira and vice versa.

However, because of how much money can be gained or lost in long time periods, points are only used to asses short term periods such as a day or a week. Points are also not just for individual stocks as they can also be used to show short-term moves in equity indexes and benchmarks.

Instead of showing the naira or dollar amounts for these indexes that could have companies stated in billions, saying it grew by 150 points is a shorter and less complex way to do so.

For context, if an index increased from 20,000 to 20,001, it is said to have gained a point. As such, you will need to know the previous value. Points here will ignore fractional values or decimal points but will show you the growth and losses in value.

Difference Between Points And Percentages

Another common thing you might have seen is a stock dropping by a percentage. While stock market points assess growth in naira terms, the percentages are expressed as percentages.

If a stock, for example, was ₦15 before and is now ₦20 naira, we can say that it has risen by 5 points. However, with regards to the percentage, it has risen by 33% (naira growth of ₦5 divided by the old amount of ₦15). 5 stock market points might sound little but it meant over 30% increase.

In the same vein, a stock might have dropped 5 points as well, from ₦8 to ₦3. Even if it is the same point, it has lost a whopping 62.5%! In other words, it is normal for some stocks to have risen or fallen by the same number of points but will have different percentages.

Another key difference is that while stock market points are used to show short term increases and decreases, long term results say for a year will be expressed in terms of percentages.

Note that points only refer only to the naira amount that has changed and nothing else. So the next time you see a newspaper article showing points that have risen or dipped, read on and see what you learn.

Written by Lawretta Egba.