The All Share Price Index closed at 2,960.77, down 0.34 percent (10.13 points) while the Milanka Price Index of more liquid stocks closed at 3,361.
44, lost 0.44 percent (15.00 points).
Turnover was 711.1 million rupees, according to provisional Colombo Stock Exchange statistics.
"The Raj Rajaratnam factor continues to affect the Sri Lankan market despite the indices falling 5.0 percent in the first two weeks of his arrest," Nikita Tissera, research manager at stock brokering house SC Securities said.
"We believe the bourse has significantly over-reacted to Rajaratnam's arrest and the current sociopolitical issues."
Some investors appeared concerned about talk of early presidential elections next year.
Conglomerate John Keells Holdings, in which Rajaratnam had a significant number of shares, closed at 143.00 rupees, down 1.25.
An analyst who did not wanted to be named said Rajaratnam was liquidating part of his Sri Lankan portfolio.
The Sri Lankan born billionaire was arrested in New York City for alleged insider dealing charges after which investors in his hedge fund sought to redeem their money, prompting speculation he might sell part of his holdings to raise cash.
Commercial Bank of Ceylon closed at 176.00 rupees, down 1.00 with nearly 780,000 shares changing hands.
Distilleries Company of Sri Lanka closed at 92.00 rupees, down 50 cents.
Hatton National Bank closed flat at 168.
00 rupees, and National Development Bank closed at 179.00 rupees, down 75 cents.
DFCC Bank closed at 145.00 rupees, down 50 cents.
Dialog Telekom, a unit of Telekom Malaysia closed flat at 7.
25, and fixed line operator Sri Lankan Telecom closed at 42.25 rupees, down 25 cents.
Plantation companies, Bogawantalawa Tea Estates closed at 40.00 rupees, up 3.50, Balangoda Plantations at 21.25 rupees, down 25 cents and Kegalle Plantations at 33.
00 rupees, up 1.75,