The All Share Price Index of the Colombo stock exchange rose 1.
35 percent (23.64 points) to end at 1,777.58 while the Milanka index of liquid stocks went up 0.98 percent (18.04 points) to close at 1,867.56.
Turnover improved to 270.9 million rupees.
"The favorable developments in the war front continued to propel the market," said Geeth Balasuriya of Acuity Stockbrokers.
"Institutional investors are slowly returning to the market with the rates falling continuously.
"
National Development Bank (NDB) was the most traded stock amongst the blue chips and contributed 82.3 million rupees to the day's turnover.
NDB gained 1.50 rupees to close at 94.50.
Conglomerate John Keells Holdings (JKH), which has business interests in transport, finance, property development, food processing and retail sectors, contributed 38.9 million rupees to turnover.
JKH went up 25 cents to close at 64.00.
"We expect the positive sentiment to continue. However, do not rule out the possibilities of profit taking towards the latter part of the week," said Balasuriya.
Index heavy Sri Lanka Telecom gained 75 cents to close at 38.75, while Dialog Telekom, subsidiary of Telekom Malaysia, closed flat at 5.
25.
Nestles Lanka Limited, a subsidiary of Swiss food giant Nestle, gained 10 rupees to close at 285, in thin trade.
Chevron Lubricants Lanka, a subsidiary of U.
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S. based petroleum giant Chevron, gained one rupee to close at 115.75.
Foreign buying was at 45 million rupees, while foreign selling amounted to 118.6 million.
At Wednesday's treasury bill auction the government rolled over two billion rupees of three month bills at 13.38 percent, 2.5 billion rupees of six month bills at 14.90 percent and 3.5 billion one year bills at 15.40 percent.