OREANDA-NEWS. March 19, 2015. Sri Lankan shares edged down to six-week lows on Wednesday, led by large caps despite foreign inflows, but dealers expect the index to bounce back on hope that interest rate might gradually come down after yields in t-bills fell at an auction.

Yields in t-bills fell 31 basis points to 44 basis points at Wednesday's weekly auction, after they spiked between 112 basis points and 124 basis points in the two previous weekly auctions. The 91-day t-bill yield fell from a 14-month high of 7.10 percent on Wednesday.

"People will feel positively about it. We expect them to come down further," said Dimantha Mathew manager, research at First Capital Equities (Pvt) Ltd.

The main stock index ended 0.19 percent, or 13.10 points firmer, at 7,043.90, its lowest close since Feb. 2. It had lost 3.74 percent in the last 13 sessions.

The day's turnover stood at 700.2 million rupees (\\$5.27 million), less than this year's daily average of 1.28 billion rupees.

Foreign investors were net buyers of 204.2 million rupees worth of shares, extending the year-to-date foreign inflow to 3.23 billion rupees.

Before the market opened, the central bank kept key policy rates steady at record lows for a 14th straight month as expected, and said the low interest rate environment is expected to continue benefiting from lower inflation.

Dealers said the market was closely monitoring interest rates amid heavy government borrowing. Sri Lanka's new government has borrowed around \\$1.37 billion since March 9, which economists have blamed on poor revenue and higher expenditure.

The heavy borrowing has resulted in a spike in market interest rates and Deputy Economic Affairs Minister Harsha De Silva told Reuters the borrowing was to pay the contractors of the infrastructure development projects.

Shares in Ceylon Tobacco Co Plc fell 0.99 percent, while biggest listed lender Commercial Bank of Ceylon Plc declined 2.23 percent.