The central bank cut its key monetary policy rates by 50 basis points before the market opened on Friday, following some of its regional peers, to boost economic growth in the face of subdued demand.
'The rate cut was good news for the market and the retail activities continued,' a stockbroker said on condition of anonymity.
The main stock index edged up 0.18 percent, or 11.29 points, to 6,250.00, the highest close since Nov. 11, 2011.
The market has gained 8.2 percent since Treasury Secretary P.B. Jayasundera and the central bank said interest rates could ease in May-June.
The rate cut came despite comments from the International Monetary Fund last week that Sri Lanka must not ease monetary conditions as inflation remained a concern, even though prices rose at a slower pace in April than the previous month.
Turnover was 1.47 billion rupees ($11.68 million), well above this year's daily average of 1.03 billion rupees.
Foreign investors were net buyers of 285 million rupees of shares, extending the net foreign inflow so far this year to 9.6 billion rupees. Last year, the bourse saw a net inflow of $303 million.
The rupee edged down to 126.23/28 per dollar, down from Thursday's close of 126.00/10, on importer demand for dollars, currency dealers said. ($1 = 125.9000 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Prateek Chatterjee)
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