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COLOMBO, March 28 (Reuters) - Sri Lankan shares closed slightly stronger on Tuesday, recovering from a more than one-year closing low hit in the previous session, as foreign investors bought battered stocks while block deals pushed the day's turnover to a one-month high.
The Colombo stock index closed 0.17 percent firmer at 5,985.08, closing below a key psychological level of 6,000.
It had closed at its lowest since March 15, 2016 on Monday as investors sold shares of lenders after the central bank tightened its monetary policy on Friday.
The central bank raised its benchmark interest rates by 25 basis points for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand-side inflationary pressures.
"The market is up on continued foreign buying while block deals pushed the turnover up," said Atchuthan Srirangan, a senior research analyst with First Capital Equities (Pvt) Ltd.
"Retail investors are still on the sidelines as they want to see a clear picture."
Foreign investors net bought shares worth 401.2 million rupees ($2.64 million) on Tuesday, raising the year-to-date net foreign inflow to 4.29 billion rupees in equities.
Turnover stood at 2.32 billion rupees ($15.29 million), the highest since Feb. 28 and well above this year's daily average of 716.1 million rupees.
As of Monday's close, the index had lost 2.18 percent since March 7 when the IMF called for monetary policy tightening if credit growth or inflation do not abate.
The stock index moved to "neutral" territory from "oversold", with the 14-day relative strength index rising to 30.957 versus Monday's 27.488, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.
Shares of Dialog Axiata Plc rose 2.70 percent, while Sri Lanka Telecom Plc climbed 1.55 percent. ($1 = 151.8000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)