First Capital calls for profit taking while betting on banks and construction

Investors at the Colombo Stock Exchange (CSE) have been advised to adopt a more defensive strategy and book profits, as the market’s stellar run in 2025 has pushed valuations beyond sustainable levels.

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In its latest equity strategy report, First Capital Research (FCR) has downgraded its exposure recommendation, urging investors to reduce their equity portfolio from 100 percent to 85 percent and raise cash holdings to 15 percent.

The strategic pivot comes as the All Share Price Index (ASPI) breached the psychological 23,000-point mark in November, recording a year-to-date gain of approximately 43 percent.

According to the research house, this surge has driven market valuations to trade at a premium compared to the 18-year historical average price-to-earnings ratio of 12.0x. Analysts note that the index has now surpassed FCR’s estimated fair value range of 21,000 to 22,000 points for 2026, suggesting that the upside potential from current levels is limited.