Reuters: Shares fell on Tuesday due to foreign outflows and as investors took profits in stocks that had rallied since the central bank’s policy rate cut, stockbrokers said.

However, investors awaited clarity on the political front and the timing of a parliamentary election as concerns over stability weighed on sentiment.

The main stock index ended down 0.32% at 7,261.78, the lowest close since 18 May.

“Investors are eagerly waiting for the announcement on the election and hope for a stable Government,” a stockbroker said on condition of anonymity.

Political uncertainty due to Prime Minister Ranil Wickremesinghe-led Government not having a majority has been a drag on the market, though the trend reversed after the central bank cut key monetary policy rates to record lows on 15 April.

The index has gained 5.3% since the rate cut.

Analysts say a new stable Government after the election coupled with strong economic measures would boost confidence.

Foreign investors sold a net Rs. 370.7 million worth of shares on Tuesday. But the Bourse has seen net foreign inflows of Rs. 5.57 rupees in equities so far this year.

Turnover was Rs. 1.18 billion ($ 8.8 million), just above this year’s daily average of about Rs. 1.13 billion.

Carson Cumberbatch Plc lost 6.7%, while Ceylinco Insurance Plc fell 6.2%.

Shares of market heavyweight John Keells Holdings, which posted a 12% growth in its March quarter net profit, closed 0.1% up.

Keells announced a share split of seven subdivided into eight, the company said in a statement, boosting liquidity in the market.

Analysts expect banking and financial shares to gain due to rising private sector credit growth, which grew 13.9% on-year in March from 12.6% in February.

Rupee spot falls near record low; pressure remains

(Reuters) - Sri Lanka’s central bank permitted the spot rupee to fall by 20 cents to a near record low on Tuesday but prevented it from falling further amid importer dollar demand while exporters held on to the greenback, dealers said.

The central bank allowed the spot rupee to slip 0.15 percent or 20 cents to 133.90, near its record low of 134.10, hit on June 28, 2012, Thomson Reuters data showed.

Since the central bank defended the currency, dealers moved to forwards because the spot rate did not reflect the real market price, dealers said.

Actively traded three-month forwards ended at 137.10/40 per dollar, compared to Monday’s close of 136.55/70.

Two-month forwards were unchanged at 135.50/80 per dollar and one-month forwards were steady at 134.70/90, as the central bank prevented the currency from falling, dealers said.

However, a central bank official on condition of anonymity told Reuters that the bank regulator only intervenes in the spot market and never fixes prices in the forwards.

The central bank has allowed the spot to fall 0.75 percent, or by 1 rupee since April 30, to account for broad gains in the dollar and rising credit demand in a low rate environment.

Two dealers said some banks are desperate for dollars and have been asking exporters to convert their dollars.

Exporters have been holding dollars as it is cheaper for them to borrow cheaper rupee loans for their operations locally at lower interest rate, dealers said.

Dealers said the currency would face pressure until either dollar inflows pick up or interest rates rise.

The spot rupee has fallen around 2.1 percent so far this year, according to Thomson Reuters data.

Dealers also said the dollars are sold between 138.50/139.00 at some authorised foreign exchange dealers outside banks.

Activity in secondary bond markets picks up ahead of weekly bill auction

By Wealth Trust Securities

Activity in within secondary bond markets picked up yesterday as yields were seen dipping marginally during the day mainly on the liquid maturities of 01.06.18, 15.09.2019, 01.08.21, 01.07.22, 01.09.23 and 15.03.25 to intraday lows of 7.65%, 8.06%, 8.45%, 8.53%, 8.70% and 8.93% respectively in comparison with its previous day’s closing levels of 7.70/75, 8.08/13, 8.48/53, 8.56/60, 8.78/84 and 9.00/07. 

Today’s weekly bill auction will have on offer a total amount Rs.21 Billion, consisting of Rs. 5 billion on the 91 day, Rs. 6 billion on the 182 day and Rs. 10 billion on the 364 day maturities. 

At last week’s auction, weighted averages decreased by 02 basis points and 03 basis points on the 91 day and 182 day bills to 6.08% and 6.19% respectively while the weighted average on the 364 day bill remained unchanged at 6.31%. 

Meanwhile in money markets, surplus liquidity stood at a high of Rs 117.11 Bn yesterday as overnight call money and repo rates averaged at 6.11% and 5.81% respectively. 

Rupee dips further  

The rupee on spot as well as active three-month forward contracts dipped yesterday to close the day at Rs. 133.90 and Rs. 136.80/20 respectively against its previous day’s closing levels of Rs. 133.70 and Rs. 136.45/55 on the back of continued importer demand. The total USD/LKR traded volume for the previous day (25-05-15) stood at $ 48.00 million. 

The six-month forward dollar rate that prevailed in the market was 138.30/50.