COLOMBO Nov 12 Sri Lankan stocks gained for the seventh straight session on Monday to end at a more than three-week high led by foreign buying and supported by optimism a new budget will bring measures to boost the capital market.
But concern over high interest rates limited trading volume, analysts said.
The Colombo Stock Exchange's main index rose 0.19 percent, or 10.45 points, to end at 5,599.88, its highest level since Oct. 19.
Foreigners bought a net 43.6 million rupees ($333,300) worth of shares, extending the net foreign inflow this year to 35 billion rupees.
Turnover, however, was 244 million rupees compared with the year's daily average of 909.4 million rupees.
"Volumes are down because the confidence has not returned," said a stockbroker who declined to be identified.
"Nobody wants to take a risk to invest in stocks when they can earn a risk-free rate of around 15 percent in fixed deposits."
President Mahinda Rajapaksa, who is also finance minister, announced in his budget speech proposals to encourage new listings of shares and debentures through tax exemptions.
Under the budget, presented on Thursday and to be voted on at the end of the week, the government also aims to reduce the fiscal deficit to 5.8 percent of gross domestic product in 2013, while reaching 7.5 percent economic growth next year.
The rupee closed firmer at 130.40/50 to the dollar compared with Friday's close of 130.75/85 in dull trade, dealers said. ($1 = 130.8000 Sri Lanka rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Robert Birsel)