CAL Bangladesh has forecasted that the Dhaka Stock Exchange (DSE) key index, DSEX, will double and surpass 10,000 points within the next 18–24 months, driven by favorable macroeconomic factors such as falling inflation, a stable currency, declining interest rates, and a recovery in economic activity.
The forecast, outlined in CAL’s latest macro and market outlook report, “All Signals Green”, is based on predictions of a 40 percent rebound in corporate earnings by 2026, driven by volume growth, improved margins, and reduced financing costs, along with an average revenue growth of 15.5 percent.
CAL analysts expect the price-to-earnings (P/E) ratio, currently around 10, to rise to approximately 14. The report indicates that the improvement in earnings, alongside foreign fund inflows, institutional rotation, and post-election clarity, will help sustain the “historic” rally in the coming years.
CAL describes this as a “Goldilocks scenario for equities,” where strong macroeconomic fundamentals, improving corporate earnings, and attractive price levels create the ideal environment for equity market growth. Analysts suggest this unique combination could spark one of the strongest equity rallies in Bangladesh’s history.
CAL, Sri Lanka’s largest investment bank and a key player in frontier markets, has a proven track record with approximately $1 billion in assets under management. The firm has built a strong reputation for accurate macroeconomic predictions for Bangladesh, which has earned recognition from Euromoney as the best investment bank for equity capital markets in the country.
Macroeconomic indicators are already showing positive momentum, creating a stable and favorable environment for growth. The report highlights that inflation has eased to 8.5 percent, thanks to tight monetary policy and favorable global commodity trends. Additionally, foreign exchange reserves have reached a two-year high, supporting a stable Bangladeshi Taka, while lower government securities yields signal easing interest rates. Positive positions in the current account and balance of payments further bolster investor confidence.
CAL forecasts an 85 percent upside potential for DSEX, even without surpassing its 2021 USD-based valuation levels. The report draws parallels with recent rallies in Pakistan and Sri Lanka, where indices surged by over 150 percent following similar macroeconomic turnarounds.
CAL believes the next two years will be a pivotal period for Bangladesh’s capital markets, with the potential to attract both domestic and foreign investment at unprecedented levels. The firm is confident that a combination of macroeconomic stability, strong corporate performance, and renewed investor confidence could propel the DSE into its most dynamic growth phase to date.
The DSE’s former broad-based index briefly hit 9,000 in December 2010, driven by speculation and market manipulation, but it subsequently crashed below 3,500 in less than 15 months. Despite several moves to recover, the market failed to surpass the 7,500 mark. Analysts have pointed to poor stock market listings over the past decade, coupled with poor regulations and governance, as key reasons for this failure.
From a recent low of 4,629, DSEX has surged above 5,400 in the past two months, fueled by expectations that the inflationary cycle has ended and is reversing.