China's securities regulator will conduct inspection on stock margin trading business at 46 companies, after it punished 12 brokerage firms for violating margin trading rules earlier this month.

"The inspection belongs to normal regular supervision and should not be over-interpreted," China Securities Regulatory Commission (CSRC) told Xinhua on Wednesday.

On Jan. 16, the CSRC announced that 12 brokerage firms had been punished for violations of margin trading rules after a two-week inspection.

The announcement caused a sell-off on the stock market. The benchmark Shanghai Composite Index plummeted 7.7 percent on Jan. 19, the steepest daily fall since June 2008.