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 0.4 percent, or 23.30 points, to 5,891.83, its highest close since Oct. 2, 2012.
'Retail investors and margin traders are active as they see at least stabilisation of interest rates as a positive sign and (the central bank) will not increase the rates in the short term,' 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 six straight sessions since the treasury secretary's comments.
The turnover was at 800.8 million rupees ($6.38 million) on Thursday, less than this year's daily average of about 965.1 million rupees.
Foreign investors were net buyers of 159.9 million rupees worth of shares, extending the year-to-date net foreign inflow to 7.31 billion rupees. Last year, the bourse saw a net inflow of $303 million.
The rupee edged down for a third straight session to 125.72/78 to the dollar, from Wednesday's close of 125.60/62, due to demand from importers for the greenback, said currency dealers.
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 = 125.5500 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)
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