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COLOMBO, Feb 3 (Reuters) - Sri Lankan shares fell to a 10-month low on Friday, dragged down by banking and beverage stocks, as investors awaited cues from the central bank's monetary policy review due early next week.
Sri Lankan stocks, which have been declining since October, have been hurt by political uncertainty arising from a decision by the ruling coalition parties to contest local polls separately, and on worries over a rise in market interest rates with yields on 91-day treasury bills hitting near four-year highs this week.
Sri Lanka's central bank could raise its key policy rates in coming months if it skips a chance to tighten next week, a Reuters poll showed, underlining renewed pressure on the rupee after the Federal Reserve's rate hike last month.
The Colombo stock index ended 0.3 percent lower at 6,119.99, while turnover was 409.5 million rupees ($2.72 million), well below this year's daily average of 635.2 million rupees.
"No big trades taking place as local investors are staying away and waiting for triggers," said a stock broker asking not to be named.
"Investors are waiting to see the interest rate direction from the policy announcement next week."
Foreign investors, who have been net sellers of 1.53 billion rupees worth of shares so far this year, net bought 89.8 million rupees worth of equities on Friday.
Shares of Lanka ORIX Leasing Company Plc fell 6.3 percent, while Cargills (Ceylon) Plc fell 2.5 percent and Dialog Axiata Plc fell 0.9 percent.
$1 = 150.3000 Sri Lankan rupees Reporting by Ranga Sirilal; Editing by Amrutha Gayathri