A strong majority Government is extremely beneficial for the stock market as stock market investments are long term ideally 3-4 years, Dimantha Mathew, Head of Research at First Capital stated.

"In relation to the bond market at the moment, since rates have dipped significantly there could be a selling pressure if a strong majority is not obtained. The expectation of investors is a strong majority to be obtained by the ruling party in line with the historical trend. However, a strong majority Government is extremely beneficial for the stock market as stock market investments are long term ideally 3-4 years. So, a strong majority Government ensures policy certainty over the next 5 years supporting long term investment decisions. Therefore, in that sense, it is extremely beneficial for stock market investments," Mathew said whilst speaking exclusively to Ada Derana Biz.

"With the prevailing low-interest rates regime and a significant dip in the market, stock market investments have become a viable and attractive alternative investment option. Therefore, a significant number of retail investors new and old have entered the market and are pumping money into the market. There is also a large amount of HNIs who also have re-entered the market. So at the moment, it is a mix of real and players. At these current prices, the overall market is very attractive, and therefore there is less selling pressure in the market," he added.

Speaking further, he stated that Sri Lanka's GDP growth is likely to contract -1.4% in 2020.

“For the second and third quarter, we are looking at -7% and -3% GDP growth. Full-year GDP growth outlook will be -1.4% with the 4th quarter having a positive GDP growth. In terms of recovery, we are broadly looking at a ‘W-shaped recovery’. So, there is a possibility of another downside towards the early or mid-next year."

"If we take credit growth in line with GDP, we are still going on a 0 to -1.5% credit growth figure and if we look at interest rates, on the yield curve we feel that bond rates have bottomed out. But, we don’t feel that there is likely to be an immediate uptrend due to the lack of demand and credit in the system. So, with that, we don’t see any sort of pressure coming in until the 4th quarter of this year. The only issue is if the liquidity comes down further. Otherwise, we feel that the interest rates can remain at these levels. However, lending rates can come down a bit further in line with the bond yields," he added.