BENGALURU, Feb 1 (Reuters) – Indian shares reversed earlier gains to close lower on Wednesday, led by a fall in insurance companies after the country’s Union budget proposed to limit tax exemptions for insurance proceeds, while Adani Group shares tumbled.

The Nifty 50 index (.NSEI) fell 0.26% to close at 17,616.30, while the S&P BSE Sensex (.BSESN) rose 0.3% to 59,708.08.

This was the worst budget day performance by Nifty 50 (.NSEI) in three years, since the 2.51% fall in 2020.

Meanwhile, Indian bond yields dropped after the government announced gross borrowing at 15.43 trillion rupees ($188.75 billion) for the next financial year. A Reuters poll had pegged gross borrowing at 16 trillion rupees.

The benchmark bond yield was at 7.2774%, dropping 11 basis points from the day’s high, while the Indian rupee was largely unchanged against the dollar.

The benchmark stock indexes rose as much as 2% after Finance Minister Nirmala Sitharaman raised the rebate limit for personal income tax to 700,000 rupees from 500,000 rupees.

But they reversed gains after Sitharaman also proposed a tax on the total returns upon maturity of life insurance policies (except ULIPs) issued on or after April 1, 2023, if the aggregate premium of such policies is more than 500,000 rupees a year.

“(The move) is overall a negative for insurance companies as it will impact the high-value premium policies – thus impacting overall industry gross written premium growth,” said Arihant Bardia, Co Founder, Valtrust, an investment management company.

Indian insurance companies were top losers post budget, with HDFC Life (HDFL.NS), SBI Life Insurance (SBIL.NS), ICICI Prudential Life Insurance Co (ICIR.NS), Life Insurance of India (LIFI.NS), General Insurance Corp (GENA.NS)and Max Financial (MAXI.NS) tumbling between 8.5% to 12.5%.

Shares of Nifty 50-listed Adani Enterprises (ADEL.NS) plunged 28.2% while Adani Ports and Special Economic Zone (APSE.NS) tumbled 19.2% on a broader selloff in Adani Group firms, which has now swelled to $84 billion since the Hindenburg report.

Earlier in the day, Sitharaman said the government will spend 10 trillion rupees ($122.3 billion) on longer-term capital expenditure in 2023/24, extending a strategy adopted to revive growth in the aftermath of the COVID crisis.

India’s federal government cut down the fiscal deficit target to 5.9% of GDP in the next financial year, compared to 6.4% for the current fiscal year.

“Running into the elections in little over a year, this budget implies that the government has decided to write the cheques earlier than people expected, which is a positive,” said Atul Suri, chief executive at Marathon Trends PMS, and fund manager, Rare Enterprises.

Reporting by Bharath Rajeswaran and Nallur Sethuraman in Bengaluru; editing by Eileen Soreng, Savio D’Souza and Janane Venkatraman