The likelihood of restarting IPOs after more than eight months has dealt a blow to a capital-thirsty market, said Wang. More than 660 companies are awaiting approval by the China Securities Regulatory Commission, he added.

During the Dragon Boat holiday, most major stock markets in the Asia-Pacific region slumped, damping investors' sentiment toward China's A-share market, said Zhang.

The regional losses continued on Thursday, with Japan's Nikkei down 6.35 percent, the Hang Seng Index in Hong Kong down 2.19 percent and the Indian BSE Sensex 1.12 percent lower.

"Today is very unusual. But the stock market in our country is always unusual. When the stocks in other countries drop, it will drop in our country. When the stocks in other countries rise, it will still drop in our country. And it always falls a lot but rises a little," said Zhang Huiling, a 75-year-old retiree, who has invested in the stock market for more than 10 years.

"The slump of the broad market is overdone despite all the negative factors, but we should caution against a long-term downward trend," said Wang.

Zuo Xiaolei, chief economist with China Galaxy Securities Co Ltd, suggested the index plunge may be led by speculation.

"I do not see (how) the macroeconomy should be blamed for today's index drop, and speculators are just making their profit-taking choices," said Zuo.

Zhang Xiaoxian and Jiang Yinan in Shanghai contributed to this story.