Indian stock markets have suffered fresh volatility amid concerns about plans to curb the flow of foreign investment in shares.
Traders have endured a rollercoaster ride in recent days
India's main share index, the Sensex, closed down nearly 4% on Thursday, having initially risen to a new all-time high above 19,000.
The index fell 9% at one point on Wednesday on worries about government efforts to contain the rising market.
Ministers said there was no cause for panic but traders warned of turbulence.
The benchmark Sensex index of leading companies closed down 717.43 points or 3.8% at 17,998.39 on Thursday, having earlier risen as much as 2%.
This fall came on top of Wednesday's eventual 1.8% decline in share values.
"Investors panicked due to the regulatory proposal," said Apurva Shah, a equity market strategist from Prabhudas Lilladher.
"We expect sharp volatility in coming days."
Wednesday's fall came after the stock market regulator proposed urgent curbs on the flow of foreign funds into shares, in order to stop the market overheating.
Indian ministers have sought to reassure the markets
The regulator's recommendation relates to participatory notes - a form of investment used by hedge funds and other foreign investors who are not registered in India.
Analysts say the proposal may be aimed at countering a surge in foreign money that has caused Indian share prices to rise sharply - worrying some policy makers about its potential impact on the broader economy.
There is also a concern that because much of the investment is coming from unregistered firms, those investors could easily pull out, damaging the markets.
Finance minister P Chidambaram said that foreign investment was still welcome and that a ban on the notes was not intended.
"But presently it is important to moderate capital flows, which are getting very copious and abundant," he said.
Some market experts have backed the government's move, arguing that current share levels are inflated.
"If they hadn't taken this step, the whole market would have imploded," said R.H.Patil, a former managing director of the National Stock Exchange.
"The present levels are totally unrealistic."
India is seen by many investors as one of the safest havens among the emerging markets as investors try to tap into one of the world's best-performing economies.
The rupee has risen more than 11% against the US dollar since the start of the year.