New Delhi - India's benchmark Sensex index dropped in early trade Tuesday as investors took profits a day after the market made a record gain of 17 per cent on hopes that Prime Minister Manmohan Singh's re-elected government will ensure policy stability.

The 30-share Sensex index of the Bombay Stock Exchange opened higher at 14,757.82 but fell to trade 450.08 points down at 13,834.13, within minutes, shedding 3.15 per cent on profit-taking by investors.

The market was able to recover in the choppy trading that followed and stood at 14,385.71, a gain of 0.71 per cent, at 11:30 am (0600 GMT).

Similarly the broader 50-share S&P CNX Nifty of the National Stock Exchange (NSE) was trading at 4,325, up 0.06 per cent around the same time, holding to Monday's gains.

The NSE had fallen by 155.5 points to a low 4,167.65 after rising to 4,464.9 shortly after the start of trading.

Brokers said the emergence of profit-taking at prevailing higher levels attracted market players to take profits, leading to a drop in the markets.

On Monday, Indian markets gave a thumbs-up to the ruling United Progressive Alliance government's victory in the national elections.

For the first time in Indian stock market history, trading had to be halted due to a surge in the Sensex as the index soared 2,111 points or more than 17 per cent.

It was the highest one-day percentage gain in any market across the world, besting the 15.3-per-cent gain on the Dow Jones Average on March 15, 1933 and a
14.2-per-cent rise on the Nasdaq composite in New York in January 2001, the Times of India newspaper reported.

The Sensex has risen by almost 50 per cent in 2009, making India, the world's best-performing stock market, the report said.(dpa)