The Sri Lanka Budget 2025 has introduced significant policy changes that will impact different industries in the Colombo Stock Exchange (CSE). Based on the proposed budgetary allocations, government priorities, and economic direction, we can identify sectors that are poised for growth and those that face challenges. This article provides an in-depth analysis of the top shares to invest in and those to avoid based on the latest budget proposals.
📈 Stocks to Invest In (High-Growth Potential Sectors)
1. Export-Oriented Companies
- Budget Impact:
- The government is implementing the National Export Development Plan (2025-2029) to boost export-driven growth.
- Sri Lanka’s Free Trade Agreements (FTAs) are being expanded, particularly with ASEAN nations.
- A new National Tariff Policy will create a simple and predictable framework for trade, reducing import costs for raw materials used in export production.
- Double Taxation Avoidance Agreements (DTA) will be extended to attract foreign trade and investment.
- Potential Stocks:
- Teejay Lanka PLC (TJL.N0000) → A leading textile exporter that will benefit from expanded trade agreements and increased export facilitation.
- Hayleys PLC (HAYL.N0000) → Strong presence in export sectors, including activated carbon, textiles, and rubber.
- Ex-Pack Corrugated Cartons PLC (PACK.N0000) → Packaging company that supports export industries, likely to see increased demand.
- Kelani Tyres PLC (KELANI.N0000) → Manufacturing rubber-based products that contribute to export growth.
2. Renewable Energy & Power Sector
- Budget Impact:
- Heavy investment in renewable energy to reduce reliance on fossil fuels.
- Competitive bidding for energy projects, favoring low-cost wind and solar projects.
- Government support for Public-Private Partnerships (PPPs) in the energy sector.
- Potential Stocks:
- WindForce PLC (WIND.N0000) → The country’s largest private renewable energy developer, benefiting from government incentives.
- Vallibel Power Erathna PLC (VPEL.N0000) → A key player in the hydropower sector that aligns with government goals.
- Lakdhanavi Ltd (Privately held but impacts energy sector investments) → Focused on energy infrastructure development.
3. Infrastructure & Logistics
- Budget Impact:
- Sri Lanka is positioning itself as a regional logistics hub, with major investments in port infrastructure.
- Development of Colombo Port’s West and East Terminals, along with expansion into new logistics parks.
- Plans to create dry ports and cargo rail services to enhance trade efficiency.
- Potential Stocks:
- John Keells Holdings PLC (JKH.N0000) → Major stakeholder in port operations and logistics.
- Access Engineering PLC (AEL.N0000) → Construction company involved in infrastructure projects, including highways, bridges, and ports.
- South Asia Gateway Terminals Ltd (SAGT – privately held) → Expected to benefit from port expansions.
4. Agriculture & Food Security
- Budget Impact:
- Rs. 35 billion allocated for fertilizer subsidies to boost agricultural productivity.
- Buffer stock policy for rice to stabilize food prices and support farmers.
- Promotion of youth entrepreneurship in agriculture, particularly in dairy farming and crop exports.
- Potential Stocks:
- CIC Holdings PLC (CIC.N0000) → Key player in agriculture, supplying seeds, fertilizer, and agrochemicals.
- Ceylon Grain Elevators PLC (GRAN.N0000) → Leading poultry and feed producer benefiting from agricultural investments.
- Kotmale Holdings (Part of Cargills Ceylon PLC) → Dairy processing company poised for growth.
5. Financial Services & Banking
- Budget Impact:
- Government initiatives to develop capital markets and increase foreign direct investment (FDI).
- Expansion of SME credit access through a National Credit Guarantee Institution (NCGI).
- Promotion of unit trusts and investment funds to deepen financial markets.
- Potential Stocks:
- Commercial Bank of Ceylon PLC (COMB.N0000) → Sri Lanka’s largest private bank, with strong fundamentals.
- National Development Bank PLC (NDB.N0000) → Well-positioned to benefit from SME credit expansion.
- First Capital Holdings PLC (CFVF.N0000) → A growing investment banking company capitalizing on market growth.
📉 Stocks to Avoid (High-Risk Sectors)
1. Aviation & State-Owned Airlines
- Budget Impact:
- SriLankan Airlines is struggling with debt, and the government has allocated Rs. 20 billion for debt repayment.
- The airline sector is not expected to see major investment or expansion in the short term.
- Stocks to Avoid:
- SriLankan Airlines (Not publicly listed but affects tourism-related stocks like Aitken Spence & JKH).
2. Fossil Fuel & Oil Companies
- Budget Impact:
- Government is shifting towards renewable energy, reducing reliance on traditional fossil fuel imports.
- Tender processes now favor low-cost electricity generation, pushing fossil fuel-based companies into uncertainty.
- Stocks to Avoid:
- Lanka IOC PLC (LIOC.N0000) → Oil distributor that may face reduced market demand due to the government’s renewable energy focus.
3. Consumer Goods & Retail
- Budget Impact:
- High inflation and lower real wages mean reduced purchasing power, which could negatively impact consumer spending.
- Taxes on imports could increase costs for retail businesses.
- Stocks to Avoid:
- Cargills (Ceylon) PLC (CARG.N0000) → Affected by reduced discretionary spending.
- Nestlé Lanka PLC (NEST.N0000) → Higher costs may hurt profit margins.
4. Tourism Sector (Short-Term Risk)
- Budget Impact:
- While long-term tourism investments are positive, the sector remains vulnerable to external shocks such as global economic slowdowns and high operational costs.
- Stocks to Avoid:
- Aitken Spence Hotel Holdings PLC (AHUN.N0000) → Could see slower-than-expected recovery.
- Cinnamon Hotels & Resorts (Part of John Keells Holdings) → May experience near-term volatility.
Conclusion: Where to Invest & Where to Avoid
✅ Best Sectors for Investment
- Export-oriented companies (Teejay Lanka, Hayleys)
- Renewable energy (WindForce, Vallibel Power)
- Infrastructure & logistics (John Keells, Access Engineering)
- Agriculture (CIC Holdings, Grain Elevators)
- Banking & financial services (Commercial Bank, NDB)
❌ Sectors to Avoid
- Aviation & state-owned airlines (SriLankan Airlines)
- Oil & fossil fuel-based companies (Lanka IOC)
- Consumer goods & retail (Cargills, Nestlé Lanka)
- Tourism sector (short-term) (Aitken Spence, Cinnamon Hotels)
This analysis is based on Sri Lanka’s Budget 2025 and its implications for the Colombo Stock Exchange (CSE). Investors should conduct further research and consider market conditions before making financial decisions
