The All Share Price Index closed at 5,065.07, down 72.31 points, while the Milanka index of more liquid stocks slid 1.36 percent (79.68 points) to close at 5,759.45, according to stock exchange provisional figures.
Turnover was 2.53 billion rupees, according to provisional statistics on the Colombo Stock Exchange (CSE) website.
Most high value blue chip stocks held their value despite the market volatility, brokers said.
The implementation of a 10 percent upward and downward price band by the regulator pushed the market down, brokers said.
The move followed unusual price swings and heavy trading in certain stocks, whose trading was temporarily suspended by the markets regulator earlier this week.
The price band will be applied on the previous day's closing price, but excludes the first trading day on any security, stakes offered on all or nothing basis, crossings, debentures and securities where the previous closing price is below one rupee.
Environmental Resources Investments (ERI) and its subsidiaries were amongst the worst hit shares after the price band came into play. ERI shares and warrants lost about 10 percent of value on Thursday, brokers said.
ERI normal shares closed at 103.80 rupees, down 11.50 (9.97 percent) with 1.16 million shares changing hands, while its Warrants 0001 closed at 87.
00 rupees, down 9.60 (9.94 percent) and W0002 closed at 58.00 rupees, down 6.40 (9.94 percent).
ERI's W0003 closed at 55.10 rupees, down 6.10 (9.97 percent) and W0006 closed at 55.40 rupees, down 6.10 (9.92 percent), brokers said.
Dankotuwa Porcelain closed at 100.
30 rupees, down 11.10 (9.96 percent), while Ceylon Leather Products closed at 221.
30 rupees, down 17.70 (7.41 percent).
Blue Diamonds Jewellery Worldwide, a former unit of Ceylinco group closed at 8.10 rupees, down 90 cents (10 percent), while its non-voting shares closed at 4.
10 rupees, down 40 cents (8.89 percent), brokers said.
Aitken Spence closed at 1,875.00 rupees, down 36.40, Hayleys closed at 302.10 rupees, down 7.60, Hemas Holdings closed at 39.
00 rupees, down 1.00 and John Keells Holdings, an index heavy stock closed at 257.30 rupees, down 50 cents.
In a privately negotiated off-the-floor deal 5.
5 million shares of Commercial Bank changed hands at 190.00 rupees per share. It closed at 190.00 rupees, down 3.00, with a total of 7.26 million shares traded, brokers said.
Hatton National Bank closed at 288.10 rupees, down 5.90, Nations Trust Bank closed at 62.60 rupees, down 1.50, Sampath Bank closed at 363.
00 rupees, down 3.70 and Seylan Bank closed at 74.30 rupees, down 3.50.