COLOMBO, May 14 (Reuters) - Sri Lankan shares slumped 1.6% on Tuesday, extending their falls into a ninth session and closing at their lowest in more than six-and-a-half years, while the rupee slipped for a fourth day in dull trade, as sectarian violence drove off investors. ** One person was killed in Sri Lanka on Monday as police fired tear gas at mobs attacking mosques and Muslim-owned shops and imposed a curfew after the worst outbreak of sectarian violence since the Easter bombings by Islamist militants. ** Sri Lankan police arrested 23 people on Tuesday in connection with a spate of attacks on Muslim-owned homes and shops in apparent reprisal for the Easter bombings that killed more than 250 people. ** Sri Lanka’s economic growth is expected to slump to its lowest in nearly two decades this year, a Reuters poll showed. Tourism, foreign investment and overall business activity have all dropped after the bombings. ** The benchmark stock index ended 1.57% weaker on Tuesday at 5,223.69, its lowest close since Aug. 30, 2012. ** Turnover was 574.6 million rupees ($3.25 million), more than this year’s daily average of around 557.8 million rupees. Last year’s daily average was 834 million rupees. ** Foreign investors bought a net 190.6 million rupees worth of shares on Tuesday, but they have been net sellers of 4.2 billion rupees worth of equities so far this year. ** The rupee closed weaker on dollar demand from banks. ** The rupee dropped 0.1% to close at 176.75/90 per dollar, compared with Monday’s close of 176.60/70, market sources said. ** Analysts expect the currency to weaken further as money flows out of stocks and government securities. ** The rupee gained 0.6% last week and is up 3.4% for the year. Exporters had converted dollars as investor confidence stabilised after a $1 billion sovereign bond was repaid in mid-January. ** The rupee dropped 16% in 2018 and was one of the worst-performing currencies in Asia. ** Foreign investors sold a net 10.8 billion rupees worth of government securities in the week ended May 8, extending net foreign outflow to 20.8 billion rupees so far this year, central bank data showed. ** Investor sentiment was damaged at the end of last year, when President Maithripala Sirisena abruptly removed Prime Minister Ranil Wickremesinghe and then dissolved parliament. A court later ruled the move unconstitutional, but the political turmoil led to credit rating downgrades and an outflow of foreign funds.
** For a report on global markets, click ** For a report on major currencies, click ($1 = 176.5500 Sri Lankan rupees) (Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)