Sri Lanka bourse up; foreign inflow after 3-weeks

* Offshore investors get in for first time in 12 sessions

* Investor woes on rising inflation hurt trading

* Rupee flat for sixth straight session

COLOMBO, March 31 (Reuters) - Sri Lanka's stock market rose on Thursday, ending three straight losses, as offshore investors entered the market to pick up shares in light volume amid inflation fears and sales to meet a regulatory deadline.

Government data showed March inflation year-on-year rose beyond forecasts to a 26-month high of 8.6 percent. [ID:nL3E7EV1KF]

The island's main share index closed 0.46 percent or 33.4 points firmer at 7,226.12. It had hit a record closing high of 7,811.82 on Feb 14.

Analysts said worries over inflation may hurt the market with a possible supply disruption due to ongoing turmoil in the oil-producing Middle East and North Africa. Oil rose over $1 on Thursday to $116.78 a barrel, heading for its biggest quarterly gain in almost 2 years. [ID:nL3E7EU0YK]

Sri Lanka's Securities and Exchange Commission has directed all stockbrokers to stop credit transactions by end-June, and cut their debtors' balances to 50 percent by Thursday. [ID:nSGE6AS0BD]

The day's turnover was at 2.2 billion Sri Lanka rupees ($19.9 million), less than last year's average of 2.4 billion rupees and well below this year's daily average is 3.2 billion rupees.

Foreign investors were net buyers of shares worth 692.4 million rupees on Thursday, the first time in 12 sessions. They have sold a net 7.1 billion in 2011, and a record 26.4 billion in 2010.

The bourse is still Asia's best performer in 2011 with an 8.9 percent gain, after bringing in the region's best return of 96 percent last year.

Traded volume was 62.1 million, against a five-day average of 63.9 million shares. The 30-day and 90-day average trading volumes were 63.7 million and 70 million, respectively. Last year's daily average volume was 67.9 million.

The bourse is trading at a forward price-to-earnings (P/E)ratio of 15.1, one of the highest among emerging markets, compared with 12.5 in Asian markets and 11.8 for global emerging markets, Thomson Reuters StarMine data showed.

The rupee closed firmer at 110.38/40 a dollar from Wednesday's close of 110.35/37 on importer dollar demand, dealers said.

FACTORS TO WATCH:

- Impact of the ongoing Middle East/North Africa turmoil on stocks and rupee

- Impact of rising inflation

- The extent of rupee appreciation the central bank will allow to curb imported inflation

source - in.reuters.com