COLOMBO Jan 27 (Reuters) - Sri Lankan stocks fell for a third straight session on Wednesday to a one-week closing low amid foreign outflow as investors worried over volatile global markets and rising returns on risk-free assets.

The main stock index ended 0.1 percent, or 6.41 points, lower at 6,316.46, the lowest close since Jan. 20.

"Even though market is still on a falling trend, there could be bounce back with the start of the earnings season and after the recent sharp fall," said Dimantha Mathew, research manager at First Capital Equities (Pvt) Ltd.

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The index has fallen 8.4 percent so far this year as foreign investors, unnerved by global concerns over China's economy, have cut their exposure.

Foreign investors sold a net 414.2 million rupees ($2.89 million) worth of shares on Wednesday, extending the year-to-date net foreign outflow to 2.69 billion rupees worth of equities.

The day's turnover was at 613.9 million rupees, less than this year's daily average of 781.2 million rupees.

The central bank rejected all bids at an auction on Wednesday, signalling it would not tolerate much increase in yields after the yield on the 364-day t-bill jumped 32 basis points to a more than two-year high of 7.80 percent last week.

This move could help investors return to the market, analysts said.

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The central bank, as expected, kept its key policy interest rates unchanged on Monday.

Shares of Ceylinco Insurance Plc fell 3.57 percent while Trans Asia Hotel Plc lost 4.92 percent. Dialog Axiata Plc dipped 0.98 percent.

Shares in conglomerate John Keells Holdings Plc dropped 0.13 percent, while Commercial Bank of Ceylon Plc , the country's biggest listed lender, declined 1.09 percent. ($1 = 143.1500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)