9 percent Monday with index heavy stocks, including banks coming under selling pressure, brokers said. The All Share Price Index closed at 6,257.
01, down 1.94 percent (124.060 points) while the Milanka index of liquid stocks dipped 1.
93 percent (134.48 points) to close at 6,818.17, according to Colombo Stock Exchange (CSE) provisional figures.
Turnover was 1.9 billion rupees.
Sri Lankan stocks rose over 120 percent up to September this year, partly due to speculative buying on margin trading.
The market has been correcting since since October, but the stocks are still among the highest valued stocks in the region.
On Monday the Securities and Exchange Commission gave until June 2011 to clear credit given by brokers to clients, extending an earlier December deadline.
By March 50 percent of credit has to be cut down.
The move may reduce panic selling by over-extended margin players, analysts said.
Among banks Sampath closed at 248.90, down 11.70 rupees, Commercial Bank closed at 263.
20, down 8.10 and DFCC closed at 196.80, down 4.70 rupees.
HNB closed at 196.30 rupees down 8.40 rupees.
Banks were among the biggest gainers this year, on expectations that taxes would come down after the budget. Though taxes did come down, the savings are expected to be put in a special fund subject to government directed lending.
Directed lending can lead to credit losses and mis-allocation of capital.
Though the budget cut corporate taxes to 28 percent from 35 percent, the government pushed up business costs by charging an extra 2.
0 percent for a new pension fund.
Hydro Power Free Lanka closed at 14.80, up 0.10 cent with 1.2 million shares being traded.
John Keells Holdings closed at 292.
60, down 3.20 cents with 1.1 million share traded while Hayleys closed at 330.10, down 9.90 rupees.