COLOMBO, March 11 (Reuters) - Sri Lankan shares gained for a second straight session on Friday as investors bought beaten-down stocks, with the index touching its technical resistance level of 6,000 points.
However, foreign investors were net sellers for the first time in 10 sessions.
The benchmark share index ended 1.21 percent up at 6,019.95.
The index had lost 3.2 percent in the two sessions through Wednesday as a government move to hike value added tax (VAT) and reintroduce capital gains tax to break out of a debt trap and qualify for a $1.5-billion IMF loan weighed on sentiment.
With the central bank's unexpected hike in interest rates in mid-February and yields on treasury bills at two-year highs, investors prefer fixed interest rate bearing assets over risk assets, stockbrokers said.
"Very slowly buying interest is coming in from high net worth investors and short-term investors who expect short gains," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.
"We expect the market to stabilise around 6,000 points."
Foreign investors were net sellers for the first time in 10 sessions, selling 16.7 million rupees ($115,371.33) worth of shares on Friday, extending the net foreign outflow so far this year to 262.8 million rupees worth of shares.
Turnover stood at 748.1 million rupees ($5.17 million), just below this year's daily average of 776.5 million rupees.
The index moved into neutral territory on Friday for the first time in the last 12 sessions after being in the oversold zone, with the 14-day relative strength index ending at 34.747 on Friday, compared with Thursday's 25.530, Thomson Reuters data showed.
A level between 70 and 30 indicates the market is neutral.
Shares in Sri Lanka Telecom Plc rose 6.57 percent while biggest listed lender Commercial Bank of Ceylon Plc rose 4.10 percent. ($1 = 144.7500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)