Sri Lankan rupee rose 0.17% to 181.10/30 per dollar on Friday, compared to Thursday's close of 181.40/50, Refinitiv data showed. It is up 0.8% so far this year. Foreign investors were sellers on Friday in the equity market for the 27th session out of last 30.

They sold a net 86 million Sri Lankan rupees ($477,778) worth of shares on Friday, extending the year-to-date foreign outflow to 10.9 billion rupees, according to index data. Equity market turnover was 404.3 million Sri Lankan rupees, less than this year's daily average of about 727 million. Last year's daily average was 834 million rupees.

Foreign investors were net sellers of government securities on a net basis for the first week in seven, selling a net 4.2 billion Sri Lankan rupees worth of government securities in the week ended Dec. 4.

Total foreign outflows from government securities through Nov. 27 stood at 47.9 billion rupees, according to central bank data. Analysts said the recent tax reduction has already been factored in and the market was waiting to see the impact of the new policy. They said investors sold shares that rose on hopes the new government will encourage an economic boom led by construction.

The government on Nov. 27 reduced value-added tax to 8% from 15% starting Dec. 1, and abolished some other taxes as well in its attempt to boost economic growth that has fallen to a near two-decade low. Emerging Asia Economics, in a note on Monday, said the tax cut decision would provide a significant boost to the economy, but put increased strain on the country's fragile public finances, with a possible loss of $2 billion in revenue.