The main stock index fell 0.39 percent, or 25.03 points, to close at 6,441.64, slipping for the first time in the last five sessions. The bourse hit its highest close since Oct. 14, 2011 on Monday.
Trading was dominated by foreign investors with foreign buying accounting for 69 percent of the day's turnover.
Foreign investors were net buyers of 1.09 billion rupee ($8.63 million) of shares, extending net foreign inflows this year to 12.56 billion rupees.
The market 14-day Relative Strength Index (RSI) was in over-bought territory of 83.627 on Tuesday and has been above the upper neutral level of 70 since April 16, Thomson Reuter data showed.
'Profit-taking brought the market down,' a stockbroker said on condition of anonymity.
Market turnover was 2.19 billion rupees ($17.34 million) on Tuesday, its highest since May 6, and well above this year's daily average of 1.05 billion rupees.
Shares in John Keells Holdings slipped 0.03 percent to 297 rupees from its all-time closing high of 297.10 rupees hit on Monday, while leading fixed-line telephone operator Sri Lanka Telecom PLC fell 2.26 percent to 43.30 rupees. Keells had jumped 19.1 percent in 12 sessions through Monday mainly due to foreign buying.
The bourse gained 3.65 percent since 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.
A fall in interest rates of fixed income assets has 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.
The rupee edged up to 126.25/30 from Monday's close of 126.30/35 on exporter dollar conversions, currency dealers said.
($1 = 126.3250 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)
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