COLOMBO May 24 (Reuters) - Sri Lankan shares fell for the third straight session on Tuesday to a 3-week closing low, led down by large caps and stocks likely to be hit by the country's worst natural disaster since the 2004 Asia tsunami.

The benchmark stock index fell 0.95 percent, or 62.69 points, to 6,570.58, its lowest close since May 4.

The index fell 1.12 percent last week, its first weekly fall in seven weeks.


On Monday, the government said the cost of landslides and floods will be between $1.5 billion and $2 billion at the minimum, as it struggles to recover from days of torrential rains that have so far claimed the lives of 94 people.

"Flood situation was the main reason for the drag down. People have started to realise the real impact and going forward more negativity should come into the market," said Yohan Samarakkody, head of research, SC Securities (Pvt) Ltd.

Lion Brewery Plc dropped 4.76 percent on Tuesday, after the alcoholic beverages manufacturer said last week it had halted production in its main factory in a Colombo suburb due to the floods.

It fell 3.45 percent on Monday.

Stockbrokers said manufacturing and banking sectors are likely to be hit due to the low employee turnout during the floods.

Concerns over a government move to increase the value added tax and impose new taxes effective May 2, which could hit the bottom line of many companies, also dented sentiment.


Turnover was 762.9 million rupees ($5.23 million), in line with this year's daily average of around 796.1 million rupees.

Foreign investors, who have net sold 4.26 billion rupees worth equities so far this year, were net buyers of 44.8 million rupees worth of shares on Tuesday.

Sri Lanka Telecom Plc fell 4.42 percent and conglomerate John Keells Holdings Plc lost 0.19 percent, dragging down the overall index. ($1 = 145.8000 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)