The main stock index rose 1.35 percent, or 85.97 points, to close at 6,466.67, its highest since Oct. 14, 2011.
Foreign investors were net buyers of 288.4 million rupees ($2.28 million) of shares, extending net foreign inflows this year to 11.47 billion rupees.
'Retail and high net worth investors are getting into strategic position in large cap shares like Keells, while foreigners continued to collect blue chips,' a stockbroker said on condition of anonymity.
A fall in interest rates of fixed income assets has also helped boost sentiment in the share market as retail investors, who dominate the island nation's bourse in terms of volume, shift to equities from government securities.
Yields in treasury bills fell in the range of 29 basis points to 45 bps on Wednesday after the central bank cut key policy rates by 50 bps on May 10, following some of its regional peers, to boost economic growth amid subdued demand.
Shares in John Keells Holdings rose 4.28 percent to an all-time closing high of 297.10 rupees. Foreign investors bought more than 242,450 shares in Keells, bourse data showed.
Market turnover was 1.28 billion rupees on Monday, more than this year's daily average of 1.04 billion rupees.
The rupee ended flat at 126.30/35 as importer dollar demand offset the exporter sales of greenback, currency dealers said.
($1 = 126.3000 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Anand Basu)
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