COLOMBO, Nov 25 (Reuters) - Sri Lanka's stock market closed down 1.04 percent on Friday, bouncing back after an erroneously entered trade triggered a panic selloff that forced a 30-minute trading halt when the sensitive Milanka Price Index dropped more than 5 percent.
Investors dumped shares amid fears of higher inflation and interest rates after this week's currency devaluation, and an erroneous trade in Distilleries Company of Sri Lanka PLC triggered panic.
The island nation's main share index plummeted 3.08 percent in early trade but closed 1.04 percent or 60.99 points weaker at 5,806.76, lowest since Sept.2, 2010.
The Colombo Stock Exchange in a statement said it is investigating the error trade.
The Milanka index, which comprises the most liquid 25 stocks, fell 5.13 percent to hit year low of 4,881.74 on a error trade closed 1.8 percent or 92.58 points weaker at 5,052.91.
Shares of Distilleries closed 3.74 percent weaker at 144 rupees a share from Thursday's close of 149.60.
The plantation sector index fell 2.53 percent on Friday, extending its weekly fall to 13.24 percent in reaction to a budget proposal to redistribute 37,000 acres of unused state planting land to small farmers.
Market heavyweight John Keells Holdings PLC ended 0.51 percent weaker at 174.10 rupees.
The day's turnover was 1.63 billion Sri Lanka rupees ($9 million), well below last year's average of 2.4 billion and this year's 2.4 billion. Average turnover in the last 10 sessions has been 986 million rupees.
Total volume was 106.3 million shares, against a five-day average of 60.7 million. The 30-day and 90-day average trading volumes were 55.9 million and 101 million. Last year's daily average was 67.9 million.
The bourse has fallen 14.4 percent since Oct. 1 and it is Asia's 11th-best performer with a year-to-date loss of 12.5 percent.
The bourse saw a net foreign inflow of 18.2 million rupees on Friday ending six straight outflow sessions, but thus far in 2011, offshore investors have sold 17.3 billion, and a record 26.4 billion in 2010.
Losers outnumbered gainers by 141 to 71 on Friday, Thomson Reuters data showed.
The rupee closed flat at 113.89/90 rupees a dollar from Thursday's close in thin trade, dealers said.
Dealers also said the pressure on the rupee eased after the central bank's comments to Reuters on Wednesday.
Two currency dealers Reuters spoke to said the central bank had sold at least $120 million since the devaluation to defend the currency at the new level amid depreciation pressure.
FACTORS TO WATCH: - Investors' moods after the devaluation - The potential for imported inflation post-devaluation - Reserve cost of defending the new rupee rate
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