Sri Lankan stocks closed at a one-month low on Friday in a five-session losing streak as investors pulled back amid rising interest rates and political uncertainty ahead of parliamentary elections.
The central bank removed a penalty rate of 5 percent on its repo rate with effect from Monday. The bank has used the measure to discourage commercial banks from parking money with it at an interest rate of 6.5 percent.
The scrapping of the penalty resulted in a rise in t-bill yields of between 86 basis points and 91 basis points on Tuesday.
The main stock index fell 0.26 percent, or 18.70 points, to 7,183.50, its lowest close since Feb. 6, declining 1.86 percent in the last five sessions through Friday.
"A proper direction is lacking. Investors are waiting to see some sort of direction in interest rates and (on the) political front," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.
Elections to Sri Lanka's 225-member parliament are expected to be announced after April 23 and it is unclear whether the ruling coalition led by President Maithripala Sirisena would contest unitedly or go to the polls separately.
Political analysts expect a hung parliament if Sirisena's coalition members contest separately in the polls.
Shares in Ceylon Tobacco Company Plc fell 1.4 percent while Ceylon Theatres fell 6.6 percent.Reuters