Sri Lankan shares rose for the second straight session on Tuesday to a one-year closing high, led by gains in banking stocks on hopes of a further 50 basis points rate cut in this week's central bank policy rates announcement, stockbrokers said. The main stock index rose 0.11 percent, or 6.88 points, to 6,344.10, its highest close since June 6, 2013.
Continued foreign buying and expectations of interest rate cuts have boosted sentiment and the market has been on a rising trend since late February. The bourse saw a net foreign inflow for the 12th straight session. Foreign investors bought 198.7 million rupees ($1.53 million) worth of shares on Monday, extending the net inflow for the past 12 days to 3.91 billion rupees. They have been net buyers of 5.75 billion rupees so far this year.
Analysts said the market is broadly expecting a 50 basis point rate cut this week. "People are expecting a rate cut and they are pushing banking shares, expecting further cut," a stockbroker said on condition on anonymity. The central bank has reduced its key policy rates to multi-year lows, but has not yet seen any improvement in credit and import growth. March credit growth slowed to a four-year low of 4.3 percent year-on-year.
Central bank governor Ajith Nivard Cabraal told Reuters on May 30 that the central bank was creating room to cut interest rates further. The central bank will announce its June monetary policy rates on Wednesday. Turnover was 957.2 million rupees, below this year's daily average of 1.01 billion rupees.
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