By GURDEV SINGH VIRK

MUMBAI--A disappointing federal budget saw India shares reverse early gains to close at a more than three-month low Thursday.

The markets didn't like the proposed tax increases for rich companies and individuals and more government borrowing.

The Bombay Stock Exchange's 30-stock S&P BSE Sensex ended down 290.87 points, or 1.5%, to 18861.54 points--its lowest since Nov. 27, 2012. The National Stock Exchange's 50-stock Nifty index shed 103.85 points, or 1.8%, to 5693.05 points.

Negative sentiment was also fueled by Thursday's expiry of monthly derivatives contracts, traders said.

However, the budget delivered on market expectations of keeping the fiscal deficit in check. Finance Minister P. Chidambaram announced a cut in the securities-transaction tax, too. He announced steps to make it easier for foreigners to invest in Indian stocks and bonds.

Nevertheless, more taxes on annual incomes of more than 10 million rupees ($184,000), a transaction tax on non-agricultural commodities trading and an increase in excise duty on high-end vehicles disappointed some, dealers said.

"It's a balanced and a realistic budget but lacked details on how the government will revive growth," Mumbai-based Magnum Equity Broking vice assistant for research Nilesh Karani said.

Banks--which make up a third of the benchmark index--led declines. The budget proposes continuing lower interest rates for short-term loans to farmers. Lower rates hurt banks. The BSE 14-stock S&P BSE Bankex index fell 3.6% to 13203.87. State Bank of India (500112.BY) fell 5.8% to 2085.40 rupees and ICICI Bank (532174.BY) closed 3.9% lower at 1040.30.

A proposal to increase lending to agriculture 22% is also a big negative for banks, brokerage IndiaNivesh head of research Daljit Kohli said. Banks have typically found it difficult to recover some loans in the sector.

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