ASPI 28,000 is now within reach this year, according to John Keells Stock Brokers, which expects Sri Lanka’s equity market to build on recurring earnings growth, improving macro stability, and rising investor confidence.
ASPI 28,000 outlook backed by earnings growth and reforms
John Keells Stock Brokers (JKSB) has projected that the All Share Price Index will reach 28,000 during the course of this year, citing sustained earnings growth, improving macroeconomic conditions, and the scope for increased foreign participation in Sri Lanka’s equity market. The forecast was outlined in the firm’s recently released Equity Market Outlook 2026.
As of Friday, the ASPI stood at 23,812 points, reflecting a strong rally since the September 2024 election of President Anura Kumara Dissanayake. Since that period, the index has risen by approximately 115 percent, a move that has drawn both optimism and caution among investors. However, JKSB believes the rally is supported by fundamentals rather than speculative excess.
The broking firm said confidence in the outlook stems largely from the current administration’s continued commitment to economic reforms under the International Monetary Fund programme. According to JKSB, policy consistency and fiscal discipline are expected to keep Sri Lanka on a growth trajectory, with gross domestic product forecast to expand by 4 to 5 percent.
Inflation is expected to remain subdued for most of the year, gradually rising to around 4 to 5 percent from the second half, partly reflecting post-Cyclone Ditwah reconstruction-related demand. Despite these pressures, JKSB anticipates that inflation will remain manageable within the broader macroeconomic framework, supporting consumption and corporate profitability.
On the fiscal front, the broking firm expects the Government to maintain a primary surplus of at least 4 percent. While infrastructure damage from Cyclone Ditwah has increased pressure for higher capital expenditure, institutional constraints and approval processes are likely to result in staggered spending rather than an immediate surge. This, JKSB believes, reduces the risk of fiscal slippage.
Government revenue is also expected to remain resilient, even with lower collections from vehicle imports. JKSB noted that structural improvements, including the gradual expansion of the tax net, are likely to lift revenue-to-GDP ratios from 15.6 percent toward 16 percent in 2026, with further gains over the medium term.
From a valuation perspective, JKSB said its coverage universe, representing around 70 percent of total market capitalisation, is currently trading at approximately 10.8 times forward earnings. Based on projections for the following financial year, valuations are expected to moderate further to around 9.2 times earnings, levels the firm considers reasonable given the improving macro environment.
Private sector credit growth remains robust, running at around Rs. 200 billion per month, while volume-led consumption growth has only begun to gain traction over the past year. JKSB also highlighted that continued capital market deepening and digitisation-related reforms provide a long runway for both earnings expansion and economic growth over the next two to three years.
Foreign investor sentiment has also shown early signs of improvement. Incremental inflows into Treasury securities over recent months suggest renewed overseas interest, and JKSB believes there is ample room for increased foreign participation in equities as confidence in macro stability strengthens.
Improving market valuations are also expected to encourage higher initial public offering activity over the medium term, further broadening the Colombo Stock Exchange and enhancing liquidity. This, in turn, could support more sustained index-level growth.
While the sharp rise in the ASPI since late 2024 may cause some investors to adopt a cautious stance, JKSB argues that much of the increase reflects the normalisation of profit margins following the hyperinflationary phase of the economic crisis, as well as catch-up growth across multiple sectors.
Crucially, the firm believes the index is capable of further improvement even without assuming valuation multiple expansion. Continued recurring earnings growth alone, supported by lower interest rates resulting from fiscal and monetary discipline, could drive additional upside.
Against this backdrop, JKSB reiterated its expectation that the ASPI 28,000 level is achievable within the year, underpinned by earnings visibility, macroeconomic stability, and improving investor participation.