• ASPI projected to reach 18,000-19,000 points by year-end
• Buying subdued as investors await clarity on US tariff dispute
• Corporate earnings expected to grow 20% YOY, driven by consumption

Despite the recent disruptions caused by the reciprocal tariffs imposed by the United States, First Capital remains bullish on the equity market.

Speaking to The Sunday Morning Business, First Capital Holdings Manager of Research Ranjan Ranatunga said: “In terms of our forecast, we are bullish on the equity market. Our forecast is at the range of 18,000-19,000 basis points for profit-taking.”

However, he conceded that in the near term, buying in the market had been repressed due to the market adopting a ‘wait and see’ approach until the conclusion of the ongoing discussions between the Sri Lankan and US authorities on the possible waiver of the announced reciprocal tariffs. 

He pointed out that the benchmark All Share Price Index (ASPI) had fallen by over 10% over the past two months after reaching its all-time high of 17,193.79 basis points on 18 February.

Ranatunga added that they were expecting corporate earnings to move up by around 20% Year-on-Year (YOY) in 2025 and for the earnings growth to be mainly driven by increased consumption.

He further stated: “In the 2025 Budget, the Government gave a lot to drive up consumption. For example, it increased salaries and ‘Aswesuma,’ while also directing a lot of capital expenditure towards construction. All of that will be favourable for corporate earnings. This will also increase the disposable income of people, which will in turn spur demand.”

Therefore, he stated that they expected the consumer goods sector to perform well and for the improved economic performance to push the banking counters upwards.

He further said that with the improved lending observed on the ground, the expected earnings of non-banking financial institutions were anticipated to pick up over the upcoming quarter. 

He pointed out that while the pent-up demand for brand-new vehicles did not materialise at the expected levels, the secondary market had now been activated, as a result of which leasing companies would see their leasing business improve over the coming quarter.  

He opined that by the latter part of the year, the global economic slowdown would start impacting Sri Lanka. However, he was of the belief that the impact would be partly offset by the increasing consumer demand spurred by the 2025 Budget proposal.