Brokers said there was no risk of a similar sell-off in the other market heavyweight, Sri Lanka Telecom, as most shares were with the government or Global Telecommunications Holdings NV, a unit of Malaysia's Usaha Tegas group.
Dialog Telekom suffered the second sharpest fall in Thursday's trading, down 9.76 percent or one rupee to close at 9.25 rupees.
It was the most actively traded stock and most active in terms of volumes while losing its status as the largest listed stock in terms of market capitalization to SLT.
According to the stock exchange interim figures, SLT's market capitalization was 75.8 billion rupees, slightly higher than Dialog Telekom, whose market cap was 75.3 billion rupees.
JKH, the second most actively traded stock, fell 2.70 percent or 2.25 rupees to close at 81 rupees after it said losses from its Lanka Marine Services bunkering unit may rise to two billion rupees.
Brokers said that despite Thursday's market losses, positive economic signs were emerging with economic growth staying strong, exports rising and inflation on the decline.
Meanwhile, Hunter & Co has said that the Supreme Court delivered judgment in its favour, dismissing the action of shareholder Al Nakib who had alleged the firm had not disclosed the value of subsidiary Lanka Canneries property in its annual reports.
Corrected - name of broker corrected
The All Share Price Index fell 2.56 percent (58.28 points) to 2,221.97 while the Milanka lost 3.78 percent (97.69 points) to close at 2,484.04. Turnover was 238 million rupees.
"Most of the declines were due to foreign funds exiting from the market," said Mohan Thangajarah of First Guardian Equities.
"The global situation is pushing foreign funds to do some sales in every market to get cash," said Dihan Dedigama of Asia Capital. "That's why the market fell."
Though blue chips led losses, there were inflows from foreign buying on a motor firm, analysts said.
Most other Asian markets also fell but recovered at the close although investors were still jittery after the shock caused by the collapse of top American financial ins titutions.
Brokers said Sri Lankan shares could fall further if there was more bad news in foreign markets although the tiny Colombo stock exchange was not that exposed to the global trading system as other regional markets.
Much of Thursday's plunge was owing to losses in Dialog and JKH as foreign funds sold.