The securities regulator has approved four new mutual funds, seen by analysts as an effort to stabilize the volatile stock markets.

The benchmark Shanghai Composite Index plunged 8.26 percent on Monday, falling for the third time in four trading sessions after the country tripled tax on stock transactions to cool the market last Wednesday.

The index recorded the largest drop since February 27 when it slumped 8.84 percent and triggered global stock sell-offs.

Four mutual funds from the fund management firms of INVESCO Great Wall, Guangfa, Fortune SGAM, and Yimin have been approved by the China Securities Regulatory Commission (CSRC). The funds will mainly invest in the stock markets.

The move ended the CSRC's suspension of new fund approvals in late May amid concerns that the huge inflow of investors cash would cause a bubble.

Five mutual funds were launched in May, raising 35.5 billion yuan (4.6 billion U.S. dollars), half of the 71.7 billion yuan raised by nine funds in April, according to the Shanghai-based financial data provider Wind Info.

Analysts said the move would help to restore investor confidence after the sharp plunge over the past few days.

Related readings:  Stocks bounce back after plunging deep  Fund agencies cautious with stock positions  New mutual funds subscriptions hit record

The Shanghai Composite Index ended 2.63 percent higher at 3,767.10 points on Tuesday after it plunged 5.66 percent in morning trade.

Wang Xinyan, deputy investment executive at INVESCO Great Wall, said that blue chips would lead in the next market rally after the correction when small-capital speculative stocks recorded huge losses.

The new fund of INVESCO Great Wall Fund Management Firm will raise 10 billion yuan and mainly invest in the blue chips.

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