COLOMBO, April 5 (Reuters) - Sri Lankan shares rose 1.3 percent on Tuesday to a five-week closing high, as local retail investors bought beaten-down banking and diversified stocks while continued offloading by foreign investors amid worries over macroeconomic stability weighed on sentiment.
Foreign investors sold a net 226.2 million rupees ($1.57 million) worth of equities, their fourth straight session of selling, and extending the year-to-date outflows to 2.85 billion rupees.
The benchmark share index ended 1.31 percent, or 79.87 points, higher at 6,159.02, its highest close since Feb. 29.
At 907.4 million rupees, turnover surpassed this year's daily average of 793.8 million rupees due to some block deals.
"It's a retail push," said Prashan Fernando, COO, Acuity Securities.
The market will see subdued trade in the coming days due to the Sinhala-Tamil new year on April 13 and 14, traders said.
Shares of the country's biggest listed lender, Commercial Bank of Ceylon Plc, rose 2.88 percent while Lanka ORIX Leasing Company Plc jumped 5.46 percent.
Analysts said investors are cautious about macroeconomic uncertainty after a rating downgrade and unclear capital gain tax.
Sri Lanka on Friday postponed a plan to reintroduce capital gains tax by six months after the move threatened to dent foreign investor sentiment.
Stockbrokers said the concern now is how the government is going to impose the tax, rather than the tax itself.
Higher market interest rates and higher borrowing by the island nation facing a balance-of-payments crisis have also weighed on investor appetite for risky assets, dealers said.
The average weighted prime lending rate has risen 84 basis points to 9.19 percent since Feb. 19, when interest rates were increased by 50 basis points, central bank data showed. ($1 = 144.5000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)