Shares in Hong Kong plummeted on investors’ profit-taking on Tuesday as a rally of over 25 percent from its late-September low fueled by an earlier sweeping policy package lost steam.

The benchmark Hang Seng Index plunged by as much as 10.1 percent, before finishing the day down 9.4 percent at 20926.79 points on Tuesday. The Hang Seng China Index, a gauge tracking mainland firms floated in the city, dropped 10.17 percent.

“Considering the cumulative gains in the Hong Kong market over the past few weeks, the extent of the decline in the Hang Seng Index (HSI) at present appears relatively reasonable,” said Kenny Ng, securities strategist at Everbright Securities International.

Last week, the benchmark index’s relative strength had risen to 95 — its highest level since 1970. Traders typically interpret a reading surpassing 70 as an indication of prices gone too far. “Today’s correction is a response to these overbought signals,” Ng said.

ALSO READ: China's major stock indices turnover expands on Tuesday morning

Officials from the National Development and Reform Commission, the nation’s top economic planner, on Tuesday told a much-anticipated press conference that they were confident of hitting the full-year GDP growth target of 5 percent and unveiled plans to issue 200 billion yuan ($28.3 billion) in advance of budget spending and investment projects next year.

But investors are salivating over further major stimulus measures to give another boost to the market where optimism had been running high, as an earlier stimulus announcement on Monday sent shares in the city to a level not seen in 32 months on Monday.

The rally in onshore Chinese equities fizzled as well. The Shanghai Composite Index surged by almost 11 percent after a week-long holiday break but narrowed the gains to end at 4.59 percent higher.

Lorraine Tan, director of Asia equity research at Morningstar, said the market is likely to take a breather until there are more supportive policy details, given that both onshore and offshore Chinese share prices have bounced to levels that no longer presented attractive upsides versus risk of disappointment.

READ MORE: Average daily turnover of HK shares up 87% year-on-year in September

“Having said this, we are optimistic that there will be more fiscal support details to be released over the next week or so. But we are not sure whether there’s enough to lead to more upward earnings revisions that would result in higher fair value estimates for the broad market,” Tan added.

Investors scrambled for Chinese shares listed in Hong Kong and mainland markets after Beijing last month unveiled a broader-than-expected stimulus package to reboot the world’s second-largest economy’s growth engine and fix its beleaguered real estate market.

The package included a reduction in the reserve requirement ratio and existing mortgage rates as well as 800 billion yuan of liquidity support tailored to the equity market. Four first-tier cities also eased homebuying curbs.

Looking ahead, Athena Chan Shan-shan, executive committee member of the Hong Kong Institute of Financial Analysts and Professional Commentators Limited, said the HSI is expected to hit 22,000 points again as there is still room for raising weighting despite the recent rebound.

However, she sounded a note of caution on stock selection, saying fundamentals and valuations should be the focus of attention.

In a recent report by Morningstar examining equity managers’ perspectives regarding China’s policy changes, few have made meaningful allocation changes. Among them, Nitin Bajaj, portfolio manager at Fidelity, revealed that he is paying close attention to the valuations of the stocks that enjoyed a significant rally since the policy announcement, and he will capitalize his gains if he believes that the good news has been fully priced in.