29/12/2011 (Reuters) - Sri Lanka's stock market rose for a fourth day on Wednesday to a four-week high on gains in illiquid large caps, despite foreign selling, while the central bank kept the rupee steady by selling over $30 million. 

Thin trading in large cap palm oil firms Bukit Darah PLC and Carson Cumberbatch PLC helped boost the overall market, gaining 4.5 percent and 1.9 percent respectively. 

Foreign investors sold top lender Commercial Bank of Ceylon, which edged up 0.4 percent, resulting in foreign outflow of 212.9 million Sri Lanka rupees ($1.87 million). The Bank accounted for almost 40 percent of the day's turnover.

Two brokers said a European based fund appeared to have been selling for the past two days, although they could not explain its motivation.  Net offshore selling year-to-date has been 18.9 billion rupees. Foreigners sold a record 26.4 billion rupees in stocks in 2010.  

The island nation's main share index closed 1.3 percent or 78.30 points firmer at 6,093.39, its highest close, since Dec. 1.

The day's turnover was 550.4 million rupees, far below last year's average of 2.4 billion and this year's 2.3 billion.

The market has been looking for an easing of credit limits imposed by the SEC, which along with the resignation of the regulator's head and deputy and a 3 percent currency devaluation have dampened the market.  

Any new direction from the new SEC head on credit limits is expected in January, brokers said.

Last month brokers, who complained that tougher regulation was hurting stock market prices, met President Mahinda Rajapaksa to urge him to intervene in his capacity as finance minister to revive the slumping bourse.       

The Colombo Stock Exchange has fallen to Asia's 10th best performer with a year-to-date loss of 8.17 percent after being at the top until June. It delivered Asia's best returns in 2009 and 2010. The rupee closed flat at 113.89/90 rupees a dollar for a 25th straight session with the central bank selling more-than $30 million to defend it, dealers said.

The central bank last week said it can continue to maintain the rupee exchange rate by selling dollars from foreign reserves as it expects large dollar inflows in the coming months.       

The bank has spent around $635 million to keep the exchange rate steady since a 3 percent devaluation on Nov. 21. It had spent a net of $1.36 billion this year up to the end of September holding back depreciation pressure.

($1 = 113.9000 Sri Lanka rupees)