But fears that company earnings could get eroded by high inflation and interest rates and a slump in demand for products as Western economies slide into recession was clouding the outlook, brokers said.
Emergency measures by foreign governments to tackle the financial crisis provided little relief for nervous investors, as stock markets around the world took a battering on fears of a global recession ahead.
Oil prices slid further as the global credit crunch and fears for slowing energy demand took their toll, with prices now down about 50 percent from July's record highs.
Commodity prices had also slumped which means reduced earnings for listed regional plantations companies, brokers said.
In Thursday's trading "foreigners once again reversed positions by tilting towards the
purchasing side and hence bringing
in a net inflow of 5.76 million rupees," Bartleet Mallory Stockbrokers said in their daily market report.
Losses in blue chips dragged down the indices with the All Share Price Index sinking 2.06 percent (41.72 points) to 1,985.79 while the Milanka fell 2.08 percent (46.97 points) to 2,213.28.
Turnover was 103 million rupees.
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Nikita Tissera of SC Securities said investors appeared uncertain given the global economic turmoil and fears earnings of companies listed in Colombo could get hit, with the bourse mirroring falls in overseas markets.
The top listed firms on the Colombo bourse fell in Thursday's trading.
Dialog Telekom sank 3.12 percent (25 cents) to close at 7.
75 rupees, Sri LankaTelecom fell 2.47 percent (one rupee) to 39.50 rupees and John Keells Holdings shed 1.99 percent (1.50 rupees) to end at 74 rupees.
The Colombo bourse had fallen heavily last week, as other markets crashed, but recouped some losses in the last two days.