Sri Lankan shares closed lower on Thursday, weighed down by losses in industrial and financial stocks, after an increase in interest rates by the country's central bank to control inflation failed to lift investor sentiment.

The CSE All-Share index ended 0.75% lower at 13,361.17, snapping a four-day win streak.

Conglomerates Expolanka Holdings Plc and Softlogic Holdings Plc were the top drags on the index, falling 1% and 6%, respectively.

As expected by many economists, the central bank raised the key deposit and lending rate by 50 basis points each.

Sri Lankan shares up as communication, real estate stocks gain

The central bank is shifting its focus to controlling inflation, curbing imports and attracting foreign capital as it looks to build reserves amidst the island nation's worst financial crisis in decades.

Some analysts believe the country could face its first-ever default unless it increases dollar inflows, despite Sri Lanka's reiteration of its commitment to repay the entire $4 billion owed to investors in the rest of 2022.

Foreign investors were net sellers in the equity market, offloading shares worth 214 million rupees ($1.06 million), exchange data showed.

The equity market's turnover was 7.08 billion rupees.

Trading volume rose to 255.6 million shares from 205.9 million shares in the previous session.