COLOMBO May 5 (Reuters) - Sri Lankan shares rose slightly on Thursday, hovering near their highest level in about four months hit in the previous session, as foreign investors turned net buyers.
However, the gains were capped as investors were worried that the island government's move to increase the value added tax (VAT) and impose new taxes effective from Monday would hit the bottom lines of companies.
Sri Lanka is seeking to raise 100 billion rupees ($687.8 million) in revenue in 2016 by increasing the VAT and new taxes, Finance Minister Ravi Karunanayake said on Sunday.
The move is part of the government's plan to meet a repeated request to raise revenue from the International Monetary Fund, which on Friday reached an agreement with Sri Lanka for a $1.5 billion bailout to help the island nation avert a balance of payments crisis.
The benchmark stock index rose 0.14 percent to 6,578.34, its sixth session of gains in seven, on Thursday, after hitting its highest level since Jan. 12 in the previous session.
"There was not much activities as investors are awaiting some strong direction on the macro economy," a stockbroker said.
Foreign investors, who have sold equities worth 2.95 billion rupees so far this year, were net buyers of 116 million rupees worth of shares.
Turnover stood at 708 million rupees, less than this year's daily average of around 779 million rupees.
Top mobile phone operator Dialog Axiata gained 1.9 percent, while top conglomerate John Keells Holdings fell 0.8 percent.
($1 = 145.4000 Sri Lankan rupees) (Reporting by Shihar Aneez and Ranga Sirilal; Editing by Subhranshu Sahu)