Market participants were clearing margin accounts.
"Punters are ignoring earnings," an analyst said. "Of course they also ignored earnings when fundamentally weak illiquid stocks were pushed up. One of the reasons for selling large cap stocks is they have some liquidity."
John Keells Holdings fell 7.00 rupees to 181.20 and Asian Hotels fell 6.60 rupees to 80.10 rupees amid speculation that they may be expropriated next, brokers said.
The state is seizing land in some 37 enterprises and expropriating one firm in its entirety.
Trading Pelwatte Sugar and Hotel Developers which are heading for expropriation has been suspended.
John Keells Holdings has a build operated transfer (BOT) agreement with Colombo Port and Asian Hotels has valuable land in Colombo. A Singaporean firm with a BOT agreement with land is being expropriated under the new law.
However a JKH official strongly denied the speculation saying there was no truth in it.
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The law targeted firms which were either privatized, had tax breaks from the Board of Investment or had land grants from the state.
Distilleries Company of Sri Lanka whose subsidiary Pelwatte Sugar was expropriated fell 8.30 to 150.60. Bimputh Finance, a micro finance company related to Sevenagala Sugar, an unlisted firm that is being expropriated fell 1.30 to 39.90 rupees.
Balangoda Plantations fell 1.30 to 31.00 rupees, Elpitiya Plantations fell 90 cents to 20.10, Hapugastenne Plantations fell 50 cents to 50.00 rupees.
Correction - Sept 13, 2010 The Colombo All Share Index fell 147 points to 6,092.30, the lowest since September 13, 2010 and the Milanka Index of liquid stocks fell 137.7 points (2.51 percent) to 5,397.03.
Turnover was 809 million rupees.
Stock fell despite strong earnings which are offering good value in some stocks which now sport single digit earnings multiples.
Asian Alliance Insurance fell 12.60 to 184.00 rupees, Bairaha Farms fell 4.00 rupees to 201.00, Sathosa Motors fell 26.30 to 222.50, Colombo Land fell 2.60 to 52.60 rupees, Tangerine Beach Hotels fell 22.
00 to 60.00 rupees.
Large cap stocks also fell.
Commercial Bank of Ceylon fell 2.60 rupees to 102.10, Hatton National Bank fell 40 cents to 82.60.