COLOMBO May 10 (Reuters) - Sri Lankan shares rose for a fourth session of gains on Tuesday to hit their highest close in four months, led by conglomerate John Keells Holdings Plc , while foreign investors' selling dented the sentiment.

The benchmark stock index rose 0.65 percent to 6,637.74, its highest closing level since Jan. 11.

"Today, Keells moved the market but foreign outflow is giving out a negative sentiment. It looks like a foreigner is exiting from Keells," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.


Foreign investors were net sellers of 445.3 million rupees ($3.06 million) worth of shares on Tuesday, extending the net selling so far this year to 3.3 billion rupees worth of equities.

John Keells Holdings Plc, which saw a net foreign selling of 2.7 million shares on Tuesday, ended up 2.2 percent.

Shares in Hatton National Bank Plc rose as much as 2.82 percent.

The turnover stood at 1.04 billion rupees, well above this year's daily average of around 778.2 million rupees.


The index gained 1.2 percent last week, its fifth straight weekly rise. The 14-day relative strength index ended at 80.541 on Tuesday, compared with Monday's 78.277, Thomson Reuters data showed. A level of 70 and above indicates the market is overbought.

However, 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 since May 2, would hit the bottom lines of companies.

($1 = 145.4000 Sri Lankan rupees) (Reporting by Ranga Sirilal; Editing by Sherry Jacob-Phillips)