January 2026 began with renewed confidence at the Nairobi Securities Exchange, as market indices extended the rally that defined much of 2025.
Prices moved higher even as trading activity slowed and foreign investors shifted to net selling, signaling a market that was rotating rather than losing momentum.
The performance underscored resilience in select sectors, particularly banking, utilities, industrials, and media, which helped sustain the upward trend despite softer participation metrics.
The Banking Index emerged as the strongest performer, rising 5.59 percent during the month and outpacing both the NSE 20, which gained 5.10 percent, and the NASI, which climbed 4.71 percent.
Strength in counters such as Absa, Co-operative Bank, Diamond Trust Bank, and NCBA drove the gains, offsetting more muted movements in Equity Group, KCB, and Stanbic. The rally reflected confidence in banks’ balance sheet strength, corporate activity, and attractive valuations, all of which positioned the sector as a preferred play for investors navigating the early weeks of the year.
Thirteen stocks posted double-digit gains, with Kenya Airways leading at 36.83 percent and Uchumi Supermarket following at 23.30 percent.
Car and General, the Absa NewGold ETF, Co-operative Bank, Kenya Power, Diamond Trust Bank, and NCBA also registered solid advances. The diversity of the gainers pointed to renewed appetite for both cyclical and defensive exposures, with investors selectively positioning across sectors rather than concentrating risk in a narrow segment of the market.
Declines Were Relatively Limited
Only fifteen stocks closed the month lower, among them Olympia Capital, WPP ScanGroup, Home Afrika, and Liberty Kenya.
Also Read: NSE Bond Trades Up Ksh.2.7 Trillion on Surged Investor Activities
Most of the pullbacks were contained and appeared to reflect profit-taking rather than widespread risk aversion. This pattern pointed to the view that the market’s underlying tone remained positive, with investors comfortable rotating between counters rather than exiting positions.
Liquidity trends, however, told a more cautious story, with Equity turnover falling by 20.7 percent month-on-month to Ksh.13.52 billion from Ksh.17.04 billion in December.
At the same time, foreign investors turned net sellers to the tune of Ksh.1.09 billion, reversing the marginal inflow recorded in the previous month. The divergence between falling volumes and rising prices pointed to domestic investors carrying the market higher, stepping in to absorb foreign outflows and sustain price momentum.
Valuations continued to provide support for the rally, where Cytonn data shows the market traded at a price-to-earnings ratio of 7.8 times, representing a 31 percent discount to the historical average, alongside a dividend yield of 5.1 percent.
The NASI PEG ratio of 1.0 times suggested that prices remained broadly aligned with expected earnings growth, offering little evidence of excess despite January’s gains, which reinforced the perception that the rally was grounded in fundamentals rather than speculative activity.
Activity in the fixed income market strengthened during the month. Secondary bond turnover rose 20.7 percent to Ksh.278.2 billion and was up 76.9 percent year-on-year. The surge reflected sustained positioning by commercial banks in an environment of stable interest rates and declining Treasury bill yields, as investors sought duration and relative value in government securities.
In the corporate realm, across the market, NCBA attracted significant attention following Nedbank’s intention to acquire a controlling stake, while the Kenya Pipeline Company’s landmark IPO reinforced the depth and evolving role of capital markets in financing large state-linked enterprises.
