The Colombo Stock Exchange's (CSE) All Share Price Index (ASPI) is expected to reach 21,000 points next year, according to a forecast from First Capital.

This optimistic outlook is primarily attributed to the current low interest rates prevalent in the market.

The Central Bank, in its latest monetary policy review on Wednesday (23), decided to maintain the Overnight Policy Rate (OPR) at its current level of 7.75%.

This decision follows a previous rate cut in May 2025, which saw the OPR reduced by 25 basis points to 7.75%.

The Colombo Stock Exchange has consistently been closing at new all-time highs, reflecting a strong performance.

This trend was a key topic during the Central Bank’s recent media briefing on Monetary Policy.

The CBSL Chief, Dr. Nandalal Weerasinghe, highlighted this as a positive sign, indicating growing investor confidence.

Dr. Weerasinghe stated, "Widening of investment opportunities on the regulated businesses is a good thing. We would like to see the stock market expanding. That's a new investment opportunity rather than people putting money into the bank and earning interest. This is another regulated investment opportunity for the people if the market is growing. Insurance is another regulated sector”

Meanwhile, at First Capital’s recent Mid-Year Outlook Investor Forum 2025, Ranjan Ranatunga, Assistant Vice President at First Capital Research, elaborated on the factors driving this strong market performance.

Ranatunga noted, "The stock market has gone up by more than 50%. It reflects the future of the Sri Lankan corporate earnings. The earnings are supporting the growth, while the low interest rate that we are having right now is also supporting because the alternative investments that are there to the public because of this low interest rate regime are very less. That is pushing people to seek more options in terms of investments. We have been having a lot of talks with the investment community right now. We are hearing that there is so much liquidity and a lot of people are bringing new money to the market. Some people are changing over from FDs, and some are moving out of other investment categories into equities, mainly because of the upside trend. All these factors combined are pushing the market up."

Commenting on the market’s future outlook, Ranatunga added, "We believe the low interest rates will continue for at least another 12 months. We expect that this will drive the ASPI to the new heights of 21,000 or 20,000 by next year. We believe that there's a lot more opportunity in the market right now. However, we have to mention that the market is at an all-time high. So from here onwards, not every investment is going to be a great investment. So you should be wise in picking your investment from here onwards, where you will see the earnings as well as the other fundamentals in the company supporting your investment decision, rather than picking just another stock"