The central bank on Tuesday kept key monetary policy rates unchanged for a fourth straight month, as expected, but left the door open for easing later as inflation is expected to slow further.
The main stock index gained 0.27 percent, or 15.85 points, to 5,868.53, its highest close since Jan. 24.
"Investors are back at the banking counters after the central bank's comments," said a stockbroker, who asked not to be named.
Expectations of falling interest rates have boosted sentiment, after Treasury Secretary P.B. Jayasundera last week said Sri Lanka's interest rates should fall in May-June as the borrowing needs of loss-making state energy companies recede.
The index has risen for the last five straight sessions since the treasury secretary's comments.
The turnover was at 610.7 million rupees ($4.87 million) on Wednesday, less than this year's daily average of about 967.4 million rupees.
Foreign investors were net buyers of 43.7 million rupees worth of shares, extending the year-to-date net foreign inflow to 7.15 billion rupees. Last year, the bourse saw a net inflow of $303 million.
The rupee edged down to 125.60/62 to the dollar, from Tuesday's close of 125.41/45, due to demand from importers for the greenback, currency dealers said.
The rupee has been on the rise since mid-March on inflows from remittances and exporter dollar sales ahead of the traditional new year, which most Sri Lankans celebrated on April 13 and April 14. ($1 = 125.4000 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)