9 percent Thursday as investors took defensive positions and opted to stay out of the market, while the banking and hotel sector stocks took a hit, brokers said.
The All Share Index closed at 2,977.16 points down 28.56 points while the Milanka Index of more liquid stocks closed down 0.82 percent (27.54 points) at 3,345.14 points according to provisional Colombo Stock Exchange data.
Turnover stood at 353.3 million rupees.
"The market has defensive position after last month's bull run," Nikita Tissera, research manager at SC Securities said.
"The market hasn't totally recovered from the Galleon scandal, even though the group announced the liquidation of its hedge fund portfolio has being largely complete."
Conglomerate John Keells Holdings closed at 141.75 rupees, down 2.25, and Distilleries Company of Sri Lanka, a unit of unlisted tea company Stassens Group, closed at 97.
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00 rupees, down 75 cents.
In banking, Commercial Bank closed at 177.50 rupees down 2.00, Hatton National Bank 163.00 down 2.00, DFCC flat 150.00 and NDB 183.75 down 50 cents.
Fixed line heavy weight Sri Lanka Telecom closed at 44.00 rupees, down 75 cents, and Dialog Telekom, a celco, closed flat at 7.25.
Brokers said some funds were waiting to pick up bargains in the case the market dips further.
Lanka Cement closed at 26.25 rupees, down 1.00, and forestry company Tochwood Investments closed at 86.50 rupees, down 2.25 on small value trades.
In hotels, Serendib Hotels closed at 36.75 rupees, down 4.00, and Sigiriya Village Hotels closed at 38.50 rupees, down 1.75.
Aitken Spence Hotels closed at 225.00 rupees, down 3.75, Asian Hotels 75.00 rupees, down 2.00, Browns Beach Hotel 60.25 rupees, down 4.00, and Hotel Developers Lanka 110.00 rupees, down 5.00.
In plantations Udapussellawa closed at 30.00 rupees, up 1.50, Maskeliya 18.50 rupees, down 50 cents, Malwatte valley 29.50 rupees, down 50 cents, Namunukula 26.00 rupees, down 1.00, and Agalawatte 19.75 rupees, down 25 cents.