The main share index fell 0.26 percent, or 15.24 points, to end at 5,836.11.
The central bank said Sri Lankan authorities had decided not to pursue the new loan from the IMF, which had said it may not be in a position to consider any direct or indirect budget support to Sri Lanka.
The central bank kept policy rates unchanged to support faltering economic growth as it expects inflation to ease from March onwards, with a subsequent fall in deposit and lending rates.
'Another rate cut would have helped the market and many local investors are awaiting a lending rate cut,' said Reshan Kurukulasuriya, Chief Operating Officer at Richard Pieris Securities.
Turnover was 705.26 million rupees ($5.58 million), less than this year's daily average of 1.19 billion rupees.
Foreign investors were net buyers of 38.23 million rupees worth of shares on Tuesday, but they have been net sellers of 1.26 billion rupees so far this year.
The rupee ended firmer at 126.15/25 to the dollar from Monday's close of 126.33/38 on exporter dollar sales, dealers said. ($1 = 126.4000 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Nick Macfie)
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