22 percent (78.31 points) to 6,346.05, while the more liquid Milanka index fell 1.38 percent (79.41 points) to close at 5,654.35, according to stock exchange figures.
Turnover fell to 700 million rupees with sharp gains or losses in illiquid shares.
Infrastructure Developers, which had been Monday highest gainer with a gain of almost 50 percent, rose another 50 percent Tuesday or 27.30 rupees to end at 82 rupees with 3,100 shares done.
On Monday Infrastructure Developers had closed at 54.
70 rupees, up 18.20, on just 300 shares traded.
Miramar Beach Hotel, the second highest gainer on Monday, lost half its gains to close at 241.10 rupees, down 47 rupees, on a single trade of just 100 shares.
On Monday Miramar Beach Hotel had risen 86 rupees or 42 percent to 288.10 rupees with 600 shares traded.
The market had risen on Friday and Monday in thin trade after eight days of losses amid speculation of pressure by powerful investors to remove Malik Cader, director general of Sri Lanka's Securities and Exchange Commission.
The SEC has cracked down on widespread microcap fraud and insider dealing recently which has been blamed for the steep correction in the Colombo bourse by powerful investors and interests connected to micro cap fraud.
The SEC has denied reports of pressure for Cader's removal, saying they were based on rumours.
HVA Foods was the most acticvely traded stock and fifth biggest loser of the day, ending at 42.
20 rupees, down 5.10 or almost 11 percent, with 1.6 million shares traded.
Serendib Hotels was the second most actively traded stock, closing at 33 rupees, up 1.
70 with 1.8 million shares done.
Trade in index heavyweight John Keells Holdings accounted for the biggest turnover with the stock closing at 190 rupees, down 1.
90.