The Colombo Stock Exchange retreated in Wednesday trade as the Iran war impasse and severe domestic flooding weighed on investor sentiment, while the rupee weakened against the US dollar.

In midday trade the benchmark All Share Price Index dropped 0.46 percent, or 104.80 points, to 22,910.52, and the index ended the session at 22,920 — down 0.41 percent, or 95 points. The S&P SL20 closed 0.40 percent lower at 6,269.

“Market has been peaking around the 23,000 mark again, with some profit taking coming down,” Dimantha Matthew, Chief Research and Strategy Officer at First Capital Holdings, told EconomyNext at the close. “Banking sector down today with increased levels of impairment due to global risks and loss levels increasing.” Earlier in the session, Ranjan Ranatunga, Assistant Vice President-Research at First Capital Holdings PLC, had attributed the dip to “the uncertainty in the Middle East” and the impact of “the heavy rains and the reported flooding” on sentiment.

Closing turnover was Rs. 2.82 billion. Capital Goods led trades at Rs. 544.7 million followed by Diversified Financials at Rs. 490.1 million. Top drag came from Melstacorp (down 1.04 percent at 190), Bukit Darah (down 3.23 percent at 935.50), National Development Bank (down 1.71 percent at 115.25) and DFCC Bank (down 1.44 percent at 136.50). Nawaloka Hospitals led gainers, up 8.44 percent at 16.70. Ceylon Tobacco announced a first interim dividend of Rs. 32.40 per share for the financial year ending March 31, 2026.

The rupee weakened further to 326.00/327.00 to the one-week US dollar at the close, from 326.70/90 the previous day, with no spot trading, dealers said. The rupee had closed at 309.50/60 on December 30, 2025. Telegraphic transfer rates were Rs. 319.00 buying and Rs. 326.00 selling, with commercial bank selling rates climbing further to Rs. 327, Newswire reported.

Bond yields were broadly steady at the close, with the short end edging higher. A bond maturing on 01.07.2028 closed at 9.65/75 percent (from 9.60/70 percent), a 15.06.2034 bond at 11.10/18 percent (from 11.08/12 percent), and a 01.10.2032 bond at 10.65/75 percent (from 10.75/85 percent). An 80 billion rupee Treasury bills auction was ongoing.

The currency and equity weakness comes as Tehran demands acceptance of its peace plan and the Met Department issued a Red Warning for severe rain across the Western and Sabaragamuwa provinces.