COLOMBO, Sept 4 (Reuters) - Sri Lankan stocks hit their highest closing in more than three years on Thursday, led by Commercial Bank of Ceylon Plc and Nestle Lanka Plc .
Analysts said low interest rates and continued foreign buying into risky assets boosted sentiment.
The main stock index rose 0.19 percent, or 13.50 points, to close at 7,060.60, its highest close since June 14, 2011.
"Buying interest was seen in big-cap counters with continued foreign purchase," said Dimantha Mathew, manager, research at First Capital Equities (pvt) Ltd.
"Net foreign inflow will provide sufficient cushion for the index to stay above the 7,000 mark."
The index has gained nearly 19.41 percent so far this year.
The bourse has been in an overbought region since July. The Relative Strength Index, a momentum indicator tracked by chartists, was at 76.928 on Thursday, Thomson Reuters data showed.
Stocks are deemed "overbought" above the 70-mark, which tends to signal a reversal in the near term.
Commercial Bank of Ceylon, the country's biggest listed lender by market capitalisation, led gains with a rise of 0.67 percent at 151 rupees, while Nestle Lanka rose 1.21 percent to 2,090 rupees.
John Keells Holdings Plc rose 0.16 percent to 249.90 rupees.
After market hours on Wednesday, Fitch Ratings downgraded John Keells' National Long-Term Rating to 'AA+(lka)' from 'AAA(lka)'.
Exchange turnover was 1.63 billion rupees ($12.52 million), more than this year's daily average of 1.2 billion rupees.
Foreign investors were net buyers of 405.2 million rupees worth of shares, extending the year-to-date net foreign inflows to 8.95 billion rupees.
The central bank did not offer 91-day t-bills at the weekly auction on Wednesday after it rejected all bids in the last two auctions, while yields on the 182-day and the 364-day treasury bills held steady for the third time. (1 US dollar = 130.1800 Sri Lankan rupee) (Reporting by Ranga Sirilal; Editing by Subhranshu Sahu)