The Budget loosened the reins on public spending to drive growth.
India's banks rely on overnight borrowings to fund longer-term lending.
Sensex falls 117.03 pts to end at 28,883.11; Nifty closes 32.85 pts down at 8,723.70.
India allows foreign investors to buy upto $81 bn
Indian bond yields may not spike if the government opts to increase spending when it unveils its annual budget in late February.
Earlier, India said the headline annual consumer price inflation accelerated to 5 per cent, compared with a 4.4 per cent print in November.
The BSE Sensex and Nifty fell more than 2 per cent on Tuesday, heading for their biggest daily loss since the midst of the rupee crisis in 2013
The central bank also said accepting money under such structures was a cognizable offence
India only has 3.5 million workers undergoing skills courses a year, compared with 90 million in China
Trouble at a single bank among the top five most connected lenders could wipe out nearly 50% of Tier I capital
The rupee had weakened by 23 paise to end at 63.51 against the American currency on Wednesday on month-end dollar demand from oil companies and persisting selling by foreign funds in stocks.
The rupee had gained five paise to close at 63.25 against the dollar in on Monday's trade on fresh selling of the US currency by exporters amid bullish stocks.
The rupee has posted its biggest single-day fall in more than four months to end at 62.95 against the dollar.
Increased demand from oil importers for the American currency kept pressure on the rupee
Rajan said an interest rate cut won't by itself lead to higher economic growth
The RBI expects inflation in 2015 to hover around 6 per cent -- its target for January 2016 -- and sees risks to the target evenly balanced.
Rupee ends at 61.89 against the dollar, falls for second straight day.
The rupee had rebounded 15 paise to close at two-week high of 61.77 against the dollar at the Interbank Foreign Exchange on Friday.
The Reserve Bank of India kept interest rates unchanged at 8.0 percent on Tuesday as widely expected, staying focused on containing inflation while adopting a more dovish tone in response to the government's call for help to revive economic growth.