COLOMBO Jan 19 (Reuters) - Sri Lankan shares fell for a third straight session on Tuesday to their lowest close in nearly 19 months due to rising yields and as investors sold their holdings to settle margin trading, brokers said.

The main stock index pared early losses and closed 0.65 percent, or 41.37 points, weaker at 6,283.24, its lowest close since June 27, 2014.

The stock market had shed about 8.9 percent this year through Tuesday's close due to foreign outflows, triggered by global concerns over China's economy.

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"Market is coming down because of overacting of local investors and the fall has little to do with the fundamentals," said Yohan Samarakkody, head of research, SC Securities (Pvt) Ltd, adding margin calls were seen as local investors sold in response to foreign selling.

Foreign investors, who have sold a net 2.35 billion rupees worth of equities so far this year, bought a net 5.5 million rupees ($38,194.44) on Tuesday.

Stockbrokers said some foreign funds have already started selling blue chips, including market heavyweight John Keells Holdings and lender Commercial Bank of Ceylon .

Turnover was at 765.3 million rupees ($5.31 million).

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The yield on 91-day t-bills rose 40 basis points to a more than three-month high of 6.78 percent in three weekly auctions since the Dec. 30 monetary policy announcement.

Shares of Cargills (Ceylon) Plc fell 5.88 percent, Bukit Darah Plc dropped 5.48 percent and Hatton National Bank Plc declined 0.41 percent.

Sri Lanka Telecom Plc fell 1.23 percent, Commercial Bank of Ceylon Plc dropped 0.85 percent and John Keells shed 0.50 percent. ($1 = 144.0000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)