The All Share Price Index closed at 7,029.
02, down 1.96 percent (140.74 points) while the Milanka Price Index of more liquid stocks closed at 6,608.
72, down 1.63 percent (109.35 points), according to stock exchange provisional figures.
Turnover was 1.3 billion rupees.
"Credit issues can be sited as the main issue while global concerns like unrest in the Middle East, rising oil price and the Japanese tsunami also had an impact on the day's trading," an analyst said.
The Securities Exchange Commission in November 2010 said it has extended a December deadline to cut credit given by brokers to their clients by six months to June 2011, with half the credit to be cut down by March 2011.
Ceylon Grain Elevators closed at 165.
70, down 5.80 rupees and 1.7 million shares changing done.
There were four crossings.
Richard Pieris closed at 13.40, down 0.40 cents with over 2.9 million shares traded.
Piramal Glass closed at 10.80, down 0.20 cents with 3.4 million shares changing hands.
In overseas markets, Japan's Nikkei dipped 10 percent on Tuesday to its lowest in two years amidst warnings of nuclear disaster due to a quake and tsunami that hit last week.
The South Korean, Taiwan and Hong Kong stock markets all dipped two percent while key indexes in Australia and Singapore fell 1.7 percent, and in mainland China, the Shanghai composite index dropped 1.
6 percent in trading Tuesday morning trade.