The Colombo bourse had hit a year-high following talks between the government and Tamil Tiger rebels in September.

But fears that the government may be about to call a snap election has caused it to fall 12% since then.

The government is considering the option of fresh elections if it cannot push through changes aimed at diminishing the President's powers.

Uncertain future

Experts are concerned about the effects of continuing political unrest.

"The uncertainty is going to remain, and that is not good for the economy or the peace process," said Rohan Edirisinghe, a constitutional expert at the University of Colombo.

Even with the recent falls the market is still up 20% this year, but brokers are nervous about the future.

"Unless some stability comes in on the political arena, the market can continue to come down," Lasantha Iddamalgoda, a broker at CT Smith Stock Brokers said.