Share prices fell suddenly in the last hour of trading on Thursday, almost wiping out Wednesday's rally and leaving investors in the dark about reasons for the moves.

The Shanghai Composite Index slumped 2.2 percent to 3,705.77 points, erasing an earlier gain of 1.5 percent. Drugmakers and technology companies led declines. A gauge of 100-day price-swings rose to the highest level in six years.

Trading volumes in Shanghai have halved from their peaks in June, while margin debt, which had fueled a world-beating rally for China's stocks, declined to a four-month low.

Thursday's trading was almost a reverse image of the previous day, when the Shanghai Composite surged in the last hour to close 3.4 percent higher. Volatility has increased this week as Monday's 8.5 percent plunge by the benchmark gauge shredded a calm induced by unprecedented government intervention.

"There were no major macro developments," said Gerry Alfonso, a sales trader at Shenwan Hongyuan Group Co in Shanghai. "The disconnect with fundamentals continues making trading challenging."

The government took a spate of unprecedented measures to stop a month-long rout that wiped out almost $4 trillion of market value, including allowing hundreds of companies to suspend trading, banning major shareholders from selling and arming a State-run financing vehicle with more than $480 billion to support the market.

The Shanghai index followed up the rout with a 13 percent rebound from the lows before slumping over the past week. Average intraday swings this week were 5.9 percent.

The CSI 300 Index lost 2.9 percent on Thursday. The ChiNext index of small-cap shares declined 4.9 percent. The Hang Seng China Enterprises Index fell 1.2 percent in Hong Kong, while the Hang Seng Index slipped 0.5 percent.

All 10 industries in the CSI 300 slid more than 2 percent, led by a 4.1 percent slump in the gauge of healthcare companies. Lepu Medical Technology Co plunged 8.3 percent, while Hualan Biological Engineering Inc slid 5.2 percent. The drug sub-index has been the best performer over the past three months, falling 5.6 percent versus the 20 percent slump for the CSI 300.

PetroChina Co, long considered a favorite holding of State-linked rescue funds, snapped a three-day losing streak, adding 0.5 percent. The oil producer had been one of the biggest sources of support for the Shanghai Composite on big down days in late June and early July.

Leshi Internet Information & Technology (Beijing) Co and East Money Information Co, the largest companies in the ChiNext, both fell more than 2 percent.

The outstanding balance of loans backed by share purchases fell by 0.6 percent to 881.7 billion yuan ($142 billion) on the Shanghai Stock Exchange on Wednesday, according to bourse data. That was the lowest level since March 16.

The drop in margin debt "means people are trying to get out of their positions", said Michael Every, head of financial markets research at Rabobank Group in Hong Kong. "And if the market doesn't drop, it suggests the central bank is doing the buying. It seems they are in the market, just not everywhere at once. Usually at the end of the day, and where they seem to think it's needed most," he said, referring to the People's Bank of China.

Market volatility manageable, says IMF chief

International Monetary Fund chief Christine Lagarde on Wednesday downplayed China's recent market volatility and said the Chinese economy is resilient and the slowdown in growth is under control.

Lagarde said, from a medium-term perspective, the benchmark Shanghai Composite Index is still more than 80 percent up from a year earlier despite the recent sharp declines.

In response to China's efforts to stabilize the market, the IMF chief said that it is the Chinese authorities' duty to prevent disorderly movements in the markets. "The fact that they (Chinese authorities) want to maintain a level of liquidity as well that is commensurate with an orderly process is also quite good."

She said that the market turmoil would not derail the IMF's discussion on whether to include the yuan in its special drawing rights basket of currencies.

"We are comforted by the determination (of Chinese authorities) to deliver on the reforms, which will be conducive, one day, when the time comes, once all the signals are checked positively, to the renminbi being included in the special drawing rights basket," she said.