Sri Lankan stocks gained to a near 5-month high led by large caps and banks as active local institutional investors and foreigners bought in risky assets, and analysts said the central bank’s rate cut had been helping the positive sentiment.

The main stock index rose 0.54 percent, or 32.08 points, to 5,977.07, its highest close since Aug. 22 last.

“Institutional appetite ruled the day’s trading session with a healthy turnover level,” TKS Securities said in a note.

Foreign investors bought 117.8 million rupees($901,000)worth of shares on Tuesday after buying a net 22.88 billion rupees worth of stocks last year, compared with a record 38.68 billion rupees net foreign inflow in 2011.

Analysts said the bourse was sustaining its upward trend and the central bank’s rate cut had helped boost the sentiment.

The central bank slashed the standing lending facility rate or reverse repurchase rate by 50 basis points to a multi-year low of 8.00 percent on Thursday, in a move to reduce commercial banks’ interest rate spreads.

The day’s turnover was 716.2 million rupees, less than last year’s daily average of about 828.4 million rupees.

Shares in Ceylon Tobacco Company PLC gained 1 percent to 1198.20 rupees, while Commercial bank of Ceylon PLC rose 1.65 percent 122.90 rupees.

The index gained 4.8 percent in 2013 after losses in the previous two years, giving a return of 2.18 percent in dollar terms. Many investors locked their funds in risk-free debentures instead of risky assets due to a sluggish bourse amid falling interest rates. (Reuters)