Indian share prices fell 1.38 percent Friday as India's Congress party-led government announced a populist pre-election budget, including a $15 billion loan bailout for small farmers, dealers said.
They said the market also reacted negatively to a proposal to raise the tax on short-term capital gains to 15 percent from 10 percent.
The benchmark 30-share Sensex index fell 245.76 points to 17,578.72, off the day's low of 17,258.2. Losers led gainers 1,630 to 1,067 on volume of 67 billion rupees ($1.67 billion).
The rupee weakened against the dollar to 39.9 from 39.8 and also fell against the euro to 60.74 from 60.12.
Banking stocks fell as India's Finance Minister Palaniappan Chidambaram announced the loan bail-out for farmers, but recovered in late afternoon trade.
"The budget was inflationary and vote-bank oriented," said R Balakrishnan, executive director with brokerage Centrum Broking.
"Banking stocks initially fell on concerns of the financial impact on banks due to the waiver of debt. But it was positive for banks as the amounts unrecovered were anyway non-performing assets," he added.
India's second largest software exporter Infosys Technologies fell 52.55 rupees or 3.29 percent to 1,546.85 while engineering multinational Larsen and Toubro fell 118.15 rupees or 3.24 percent to 3,523.05.
The country's largest lender State Bank of India rose 71 rupees or 3.48 percent to 2,109.7 while regional lender Punjab National Bank rose 22.85 rupees or 3.93 percent to 604.15.
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