2 percent fall a day earlier, while the sale of a strategic stake in a finance company went at a premium to market, dealers said.
The broad Colombo All Share Price Index lost 23.15 points to close at 1,900.57, and the Milanka Index of liquid stocks slid 1.
3 percent (28.93 points) to close at 2,127.17 points.
"The market fell mainly because large cap stocks like Sri Lanka Telecom and John Keells Holdings fell," Arjuna Dissanayake of DFCC Stockbrokers said.
SLT one rupee 38.00 and JKH closed at 65.00 rupees, down from 67.00 after dipping as low as 63 rupees.
Eshana De Silva, chairman Sherman Logistics and Esna Holdings, who is also a director of PABC Bank and the Board of Investment, bought a 7.5 percent stake (2.581 million shares) in L B Finance for 56 million rupees at a 2.
75 rupee premium from the previous day's close.
The seller was the former Pramuka Development and Investment Bank.
The bank was nationalized following its collapse.
Associated Electrical (AEC) also bought back 78,000 shares for 142.5 million rupees.
Six million shares of Dialog Telekom were crossed.
Dealers say the battering in regional markets was filtering to Sri Lanka and earnings expectations of firms were also poor.
In debt markets also there had been foreign selling in government bonds.
A bond maturing in 2012 which is popular among foreign investors spiked to 20.50 percent while central bank intervention in currency markets continued, dealers said.