Reuters: Sri Lankan share index fell for a seventh straight session on Tuesday due to panic selling, led by margin calls after the market fell over 3.5% in the past six sessions, brokers said.

Fears over investors shifting to risk-free assets such as government securities due to rising yields in government securities also dented sentiment.

The main stock index ended 1.74% or 115.97 points down at 6,534.35, the lowest close since 7 July, 2014. The index fell as much as 1.85%, posting its biggest fall since 24 August  2015.

“Market came down due to margin calls and panic selling,” said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

The bourse dipped further into an oversold territory on Tuesday with the 14-day relative strength index at 17.311 points versus Monday’s 22.844, Reuters data showed.

A level between 30 and 70 indicates the market is neutral.

The turnover was at Rs. 997.2 million ($6.94 million).

Foreign investors were net sellers of Rs. 271.4 million worth of equities on Tuesday extending the year to date net foreign outflow to Rs. 1.95 billion, compared with Rs. 4.43 billion of outflow in 2015.

Local investors are worried of more monetary tightening after the Central Bank raised commercial banks’ statutory reserve ratio by 150 basis points with effect from 16 January.

Following the Central Bank’s move, the yield on 91-day t-bill rose 19 basis points to an over three-month high of 6.78% at a weekly auction on Tuesday.

Shares in Nestle Lanka Plc fell 2.09%, Lion Brewery Plc lost 9.61% and conglomerate John Keells Holdings Plc closed 1.83% lower, dragging the overall index.

Commercial Bank of Ceylon Plc, the country’s biggest listed lender, fell 1.89%.

Rupee ends steady; gains expected

Reuters: The Sri Lankan rupee ended steady on Tuesday as late importer dollar demand helped offset bank and exporter dollar sales, dealers said.

However, some dealers anticipate the rupee to appreciate due to expected dollar deposits from foreign investors.

An unidentified investor has promised to invest $1 billion in dollar deposits in Sri Lanka, Finance Minister Ravi Karunanayake told Reuters, in an unusual move that highlights the country’s precarious finances.

Karunanayake refused to reveal the investor’s identity, but said the individual is a Belgian working with a Sri Lankan partner to invest $1 billion in dollar deposits in Sri Lanka.

The rupee ended steady at 143.75/85 per dollar.

“The importer dollar demand came later during the trading session. There was greenback selling especially in the forward market after Reuters report of an investor putting in $1 billion in the market,” said a currency dealer, requesting not to be named.

Another dealer said the perception of rupee facing depreciation has now changed due to expected inflows.

A few dealers said a private bank was also seen selling dollars in the market.

The yield in 91-day t-bills rose 19 basis points to a three-month high of 6.78% at the weekly auction on Tuesday.

Finance Minister Ravi Karunanayake said on Friday they will look into an approach soon which should help ease the pressure on the rupee.

Commercial banks parked Rs. 98.4 billion ($684.59 million) of surplus liquidity on Tuesday using the Central Bank’s deposit facility at 6%, while they borrowed Rs. 2.2 billion through the Central Bank’s lending facility at 7.5%, official data showed.