Investors are banking on renewed economic strength and profits in the country that emerged in May from a bloody and protracted civil war which claimed between 80,000 and 100,000 lives over nearly four decades.
"All the economic indications are in the right direction but the end of the war has been the key factor" in the market's performance, said Shivantha Meepage, analyst at Acuity Stockbrokers in the capital Colombo.
Tourism-related stocks have been faring particularly well on the back of expectations that more foreign holidaymakers will visit the country's golden sandy beaches, picturesque tea-growing mountains and ancient heritage sites.
Infrastructure-related shares have also been performing strongly on the back of plans by the government to rebuild Sri Lanka's war-ravaged northeast.
The positive news has helped make the stock market Asia's best performer and just behind Peru's Lima in the global stock market rankings.
So far this year, the All Share Price Index (ASP