COLOMBO, Sept 9 (Reuters) - Sri Lanka's benchmark index fell for the third straight session on Friday, dragged down by large caps, as investors stayed on the sidelines amid confusion over falling bond yields, stockbrokers said.

The benchmark Colombo stock index ended 0.11 percent lower at 6,494.86, its lowest close since Aug. 1. The bourse had fallen 0.68 percent last week, posting its third straight weekly loss.

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"Downward trend is continuing as investors are still in profit-taking mode," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd. "We believe the downtrend and the low turnover is shortlived."

Analysts said they expected shares to rise after results of the central bank's weekly treasury bill auction on Wednesday showed yields fell between 23 and 34 basis points, with the benchmark 91-day treasury bill yield falling for the first time since July 8.

However, the index fell as there is confusion on the bond yields, brokers said. The t-bill yields fell, and short term fixed deposit yields have been higher, attracting some investors in share markets to fixed assets, dealers said.

Foreign investors net sold 28.3 million rupees ($195,037.90) worth of shares on Friday, extending the year-to-date net foreign outflow to 2.77 billion rupees worth of equities.

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Turnover stood at 303.2 million rupees, less than half of this year's daily average of 749.7 million rupees.

Shares of Nestle Lanka Plc fell 2.42 percent, while Carson Cumberbatch Plc fell 2.49 percent. ($1 = 145.1000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)