Thousands of fortune hunters have rushed to an Indian village following reports that local residents had discovered precious stones in a dried-out lake.

Armed police have now been deployed by the government to stop anyone from accessing the site.

Over a dozen people from our village managed to sell stones worth 100,000 to 200,000 rupees

Local resident Rajkumar Sambhaiah

The lake lies next to an abandoned diamond mine, believed to be the source of the world famous Koh-i-noor diamond.

Local media reports in the past few days had said that residents of the village, which is in the southern state of Andhra Pradesh, had found an unusually large number of diamonds.

It followed monsoon rains which, many believe, wash away the top soil exposing the stones.

Rumours

Police are now investigating reports that local residents had sold them for several hundreds of thousands of rupees.

Prospecting is illegal under Indian law.

Indian diamonds have a regal history

"Over a dozen people from our village managed to sell stones worth 100,000 to 200,000 rupees ($2,080 to $4,160) to traders over the last few days," the AFP news agency quoted a resident, Rajkumar Sambhaiah, as saying.

But an official of the state's mines and geology department told the BBC that the area was known to be a rich source of diamonds centuries ago.

"The area is also known to have transparent quartz. It is possible the people are mistaking them for diamonds," the official, Rajgopal, said.

The abandoned mines lie in a mineral-rich area of Andhra Pradesh, along the banks of the Krishna river.

The Koh-i-noor (Mountain of Light) diamond was discovered in the 14th century and now lies in the Tower of London, as part of the British Crown Jewels.