COLOMBO, Jan 2 (Reuters) -
The Sri Lankan bourse rose for a fifth straight session to an 11-week high on Thursday as investors bought banking shares after the central bank cut its standing lending facility rate by 50 basis point to a multi-year low.
Before the market opened for trading, the central bank slashed the standing lending facility rate or reverse repurchase rate by 50 basis points to 8.00 percent, in a move to reduce commercial banks' interest rate spreads.
The main stock index gained 0.93 percent, or 55.26 points, to 5,968.04, its highest close since Oct. 17. Revealing the 2014 financial and monetary policies, Central Bank Governor Ajith Nivard Cabraal said Sri Lanka's economy is expected to grow 7.8 percent this year, with an inflation target of between 4-6 percent in a lower interest rate regime.
"Rate cut and the positive outlook on the road map helped the market," said a stockbroker on condition of anonymity. The index is now in an overbought region as its 14-day relative strength index hit 76.053, above the upper neutral level of 70, and higher than Tuesday's close of 69.332, Thomson Reuters data showed. The stock market was closed for a special holiday on Wednesday.
The index gained 4.8 percent in 2013, snapping losses in the previous two years, giving a return of 2.18 percent in dollar terms.
Many investors locked their funds in risk-free debentures instead of risky assets due to a sluggish bourse amid falling interest rates.
Foreign investors were net sellers for the first time in seven sessions. They sold 350 million rupees ($2.68 million) worth shares on Thursday after buying a net 22.88 billion rupees worth of stocks last year, compared to a record 38.68 billion rupee net foreign inflow in 2011.
The day's turnover was 944.1 million rupees, well above last year's daily average of around 828.4 million rupees.
($1 = 130.8000 Sri Lanka rupees)
(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)
Source: http://in.reuters.com
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