The Bombay Stock Exchange's 30-share Sensex surged past the psychological level of 5,000 points within minutes of Chidambaram's announment of the proposal to hike the foreign direct investment limit in telecom, insurance and aviation. But that spurt was very shortlived.

The stock market reacted negatively to the 0.15 per cent turnover tax imposition proposal and the Sensex plunged 112 to close at 4844.

However, the stock market had other fears too: that the Leftists would force the government to go slow on reforms. But the finance minister said his government believes foreign companies are important in meeting India's massive investment demand, especially in infrastructure.

He also announced the setting up of an Investment Commission to woo foreign investors.

Indian stock dealers react as they watch the Budget telecast.

Photo: Sebastian D'Souza/AFP/Getty Images

Budget 2004-05: Complete Coverage