COLOMBO, March 24 (Reuters) - Sri Lankan shares edged up on Friday from a more than one-year closing low as foreign investors picked up battered shares in a market that had already factored in a monetary policy tightening by the central bank, dealers said.
The central bank raised its benchmark interest rates by 25 basis points on Friday for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand side inflationary pressures.
The Colombo stock index closed 0.3 percent up at 5,996.28, edging up from its lowest close since March 15, 2016 hit on Thursday. The index breached a key psychological barrier of 6,000 on Wednesday.
"Foreigners are buying in the 'oversold' market and are looking at the long term," said Yohan Samarakkody, head of research at SC Securities.
"Rate hike was already factored in," Samarakkody said, adding that some investors were expecting a larger hike.
Turnover stood at 1.92 billion rupees ($12.7 million), more than double this year's daily average of 671 million rupees.
The index had lost 2.1 percent through Thursday since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.
The bourse rose to "neutral" territory from "oversold", with the 14-day relative strength index at 30.480 points versus Thursday's 24.614, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.
Foreign investors net bought shares worth 551.1 million rupees, raising the year-to-date net foreign inflow to 3.81 billion rupees in equities.
Shares in Ceylon Tobacco Company Plc rose 3.9 percent, while Commercial leasing and Fiance Plc jumped 8 percent. ($1 = 151.4000 Sri Lankan rupees) (Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)