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COLOMBO, Jan 4 (Reuters) - Sri Lankan shares fell for a fourth straight session on Wednesday, to end at a near nine-month low, as investors sold large-cap shares on fears that continued foreign selling in John Keells Holdings could dampen market sentiment further.
Foreign investors sold a net 745 million rupees ($4.98 million) worth of equities on Wednesday, the highest in a day since Sept 22, 2016, extending the net outflow in the first three trading sessions of the year to 815 million rupees.
Worries over a weakening rupee and rising interest rates also weighed on the sentiment.
"Investors still don't have the confidence to buy the shares," said Atchuthan Srirangan, a senior research analyst with First Capital Equities (Pvt) Ltd.
"Amid interest rate volatility and policy uncertainties, they are not willing to buy for long term. They will wait to see the long-term picture."
The Colombo stock index ended 0.1 percent down at 6,153.13, its lowest close since April 4. The bourse fell 9.7 percent in 2016, its second straight annual decline.
The index dipped into the oversold territory further on Wednesday with the 14-day relative strength index extending its fall to 28.569 points versus Tuesday's 29.238, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.
Conglomerate John Keells Holdings Plc, which saw net foreign selling of 5.22 million shares that accounted for 82 percent of the day's turnover, however ended 1.2 percent higher on the back of bargain hunting by domestic investors.
Talks of a high net worth foreign investor exiting from Keells has triggered panic selling, dealers said.
Yields on treasury bill auctions rose 5-6 basis points at a weekly auction on Wednesday.
Sri Lanka's central bank governor on Tuesday signalled less intervention to defend the currency and the market has braced for a depreciation in the currency.
The country's failure to attract foreign direct investment and a lack of investor confidence due to a reversal in some 2016 budget policies weighed on the market and on the rupee, stockbrokers said. The currency lost 3.9 percent in 2016 and continues weaken.
Turnover stood at 958.3 million rupees ($6.41 million).
Shares in Ceylinco Insurance Plc dropped 18.1 percent while large cap Ceylon Tobacco Company Plc lost 1.6 percent. ($1 = 149.5000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)