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The main stock index edged down 0.18 percent, or 11.38 points, to 6,451.68. It had closed at 6,463.06 on Friday, the highest since May 23, Reuters data showed.
Foreign investors accounted for around 54 percent of the day's turnover of 750.45 million rupees ($5.93 million), which was below this year's daily average of 1.05 billion rupees.
The bourse saw a net foreign inflow of 342.3 million rupees, extending year-to-date inflows to 14 billion rupees.
"The market is running on foreign buying. We will see continuous foreign buying with a bit of corrections," said a stockbroker asking not to be named.
The market's 14-day Relative Strength Index (RSI) was still in overbought territory, at 75.673 on Monday and has been above the upper neutral level of 70 since April 16, Thomson Reuters data showed.
Retail profit-taking pulled the banking index by 0.18 percent down, led by Commercial Bank of Ceylon which fell 1.05 percent.
Analysts, however, said falling interest rates helped investors to be still optimistic about the market.
The island nation's central bank unexpectedly cut its key monetary policy rates by 50 basis points on May 10 to boost economic growth in the face of subdued demand and the market interest rates have been falling since then.
The rupee ended weaker at 126.20/55 per dollar from Friday's close of 126.45/50 on importer and bank demand for the greenback, dealers said.
($1 = 126.5250 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)
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The ASPI closed 11.38 points lower, down 0.18 percent, at 6,451.68 while the S&P SL20 closed 0.29 percent lower at 3,635.59, down 10.73 points.
Foreign purchases amounted to Rs. 403.21 million, leading to a net inflow of Rs. 342.28 million.
"The market opened the week to a lackadaisical start declining by a notch to end the session at 6,452. Turnover recorded Rs.750 million with trading in United Motors and Ceylon Tobacco accounting for 49 percent of the day’s total. Gainers matched losers with Swadeshi Industrial, Miramar Beach and Maskeliya rising by 50.0 percent, 17.4 percent and 17.4 percent and offsetting losses in Ceylon Printers, Nuwara Eliya Hotel and Multi Finance which fell by 16.6 percent, 11.1 percent and 9.6 percent respectively,"DNH Financial said.
In money markets, the rupee closed slightly weaker against the US dollar at Rs. 126.52/55 against the greenback from an opening position of Rs. 126.48/52.
"There was some thin importer demand," a currency dealer said.
The secondary Treasury bond market came to a standstill yesterday, dealers said with yields unchanged across most maturities with the exception of the year yield which closed down at 11.50/54 percent from 11.55/60 percent last Friday.
"After the inflation numbers came out last week, bond holders seem to be adopting a wait and see attitude," a dealer said.
Inflation accelerated to 7.3 percent in May from 6.4 percent in April largely due to the electricity price hike.
"The good news is that rupee liquidity was positive in the banking system with an excess position of Rs. 18 billion," a dealer said.
The benchmark Colombo All Share Index closed 11.38 points lower at 6,451.68 and the S&P SL 20 Index closed 10.73 points lower at 3,635.59 down 0.29 percent.
Turnover was 752 million rupees up from 731 million day earlier.
Foreigners brought 403 million rupees worth shares while selling 60 million rupees of shares, in a day that 91 stocks advanced and 112 stocks declined.
Ceylon Tobacco contributed most closing at 1,000.00 rupees up 14.60 rupees helped by a crossing of 50,000 shares at a price of 1000 rupees per share.
Chevron Lubricants Lanka closed at 345.20 rupees up 16.90 rupees. Since end of April LLUB has gained 95 rupees. LLUB is expected to rise to 350.00 rupees per share by the end of the year while the stock is overvalued brokers said.
United Motors recorded a crossing 2.4 million share at a price 120 per share to close at 121.00 down 40 cents.
John Keells Holdings lost 1.50 rupees to close at 283.50 rupees and Nestle Lanka closed at 1,997.60 rupees down 3.10 rupees.
Hatton National Bank closed at 167. 00 rupees down 2.90 rupees, DFCC Bank closed at 142.00 rupees down 02.90 rupee and National Development Bank closed at 174.10 rupees down 2.80 cents.
Pan Asia closed flat at 21.00 rupees. Union Bank of Colombo closed at 19.10 rupees up 30 cents and Sampath Bank lost 2.90 rupees to close at 220.10 rupees and Commercial Bank of Ceylon closed at 122.00 down 1.30 rupees.
LB Finance closed at 134.40 rupees up 4.50 rupees and Peoples Leasing and Finance closed at 14.80 rupees down 10 cents.
The Lion Brewery lost 10 cents to close at 410.00 rupees down 9.90 rupees and Distilleries Company lost 1.90 rupees to close at 201.50 rupees.
Aitken Spence closed at 135.00 up 1.00 rupee. Browns Investments closed flat at 3.50 rupees.
Softlogic Holding closed at 11.70 rupees down 10 cents and Vallibel One closed flat at 19.70 rupees down 10 cents.
Sri Lanka Telecom closed at 43.00 rupees up 50 cents and Dialog Axiata closed at 142.00 down 2.90 rupees.
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