On winning a new construction project, Rajiv moves with his family to a new place, one which is both close to the woods as well as the beach. Rajiv's mother has gone to Rishikesh, so he stays there only with his wife Aarti, 2 kids and housemaid Laxmi. Rajiv's kids, Raksha and Rohan begin exploring the new place and the surroundings - the lonely beach and then the woods behind the house. They are soon visited by Rajiv's sister Arushi and her husband Ronnie, who have come to spend some time with the family.
The terror begins with Raksha and Rohan finding a doll in the woods and bringing it home. It happens to be a doll controlled by the ghost of Madhu, who has now returned from the dead to take revenge on Rajiv. It then progresses to a series of highly traumatizing experiences for the whole family. Madhu enters Arati and she begins to act weirdly. Rajiv soon realizes that Madhu has returned from the grave and wants revenge. He immediately informs his friend Vinay, who helped him previously in killing Madhu, and his friend sets out to find Anshuman, Madhu's husband, hoping that the latter can be of some help. But unfortunately on his way he is attacked in his car by Madhu and he meets with an accident.
Manja, the exorcist who kills Madhu, meets a gruesome death at the hands of her ghost. Advised by Vinay, now Rajiv approaches another exorcist, but he is not of much help. He advises Rajiv to leave the city and go someplace where Madhu cannot reach him. Eventually this man is also killed by Madhu's possessed doll, but not before he manages to burn it.
Now the grotesque killings begin. The watchman and Laxmi are murdered brutally, Arushi is drowned in the swimming pool of the house, and Arati, possessed by Madhu's bala spirit, acts weird. Rajiv is left alone with his 2 children at home, and Arati(Madhu) begins to traumatize them from all directions. Rohan and Ronnie are trapped in their room, with no way to help. The ghost attacks Rajiv and Raksha, and stabs Rajiv. It then moves to kill Raksha, with a wounded and helpless Rajiv trying his best to protect her in the heavy rain. Finally they reach the terrace, where Rajiv attacks Arati and pushes her off the rooftop, and she falls to her death. The ghost now leaves Arati and the family for the time being.
The film ends with Rajiv carrying Arati into the house, with Raksha, Rohan and Ronnie looking on.Sudeepa as Rajiv
Amruta Khanvilkar as Arati
Ahsaas Channa as Raksha
Rishabh Jain as Rohan
Anu Ansari as Lakshmi
Ashwini Kalsekar as Madhu
Neeru Bajwa as Arushi
Amit Sadh as Ronnie
Ganesh Yadav as Vinay
Zakir Hussain as Manja
Vikas Shrivastav as Balu
Rakesh Raj as Property Agent
Chyan Trivedi as Goswami
Jeeva as Exorcist
Director Ram Gopal Varma claims that Phoonk 2 is scarier than Phoonk and says that the person who can watch the film without getting scared can win Rs 500,000. According to Varma, "Someone who says he won’t be scared while watching the film will be shown Phoonk 2 in a theatre alone. He will be attached to an ECG machine to monitor his heart beat and the machine will be connected to a screen outside the hall. If his heart beat stays normal, he will win Rs. 500,000."
The person who dared to watch Phoonk 2 alone was Hitesh Sharma from Mumbai. The contest was held at FAME Cinemas. The contestant lost the contest. After the contest Varma told reporters that "The bottom line is the challenger has lost and we won. I am very happy". There were screens outside the hall to monitor his heartbeats and facial expression. After watching the film for 45 minutes, Hitesh took away his face from the screen and waved saying he couldn't take the scares anymore. "There were many scenes, which were really scary but I was controlling myself. Then came a scene which I couldn't bear any more, so I gave up."
Varma offered Hitesh to work with him in Phoonk 3. "I am very happy to be a part for Ramu’s Phoonk 3. I have just learned that he has offered me a role. Nothing was planned. I got scared and I feel Ramu is right when he says 'My film is scarier'", Hitesh added.
lvis D Silva of Rediff quoted as "too much noise" and gave 2.5/5. Sonia Chopra of sify.com gave 2.5/5 and said "Phoonk 2 starts off being is scarier and bloodier than the first film, but ends up conforming to the regular horror fare complete with spirit possessions and the white-eyed ghost.". Nikhat Kazmi of THE TIMES OF INDIA said "Phoonk 2 is just another run-of-the-mill horror film and doesn't do anything to lift the genre to another level altogether" and gave 2.5/5. Anupam Chopra of NDTV gave 2/5 and said that "There are a few fun moments here – the tantrik who messed with Madhu in the first film loses his head, literally. But mostly Phoonk 2 is all tease and no pay-off". Rajeev Masand of CNN IBN gave 2/5 and said "Phoonk 2 is not scary enough". Taran Adarsh gave 1.5/5
The film collected 6,86,00,000 in 3 weeks. The boxofficeindia.com has termed that film as 'theatrically flop' despite the collection being surpassed the budget of 4 crore that is because the film was released with huge no of prints and the occupancy in the theatre was only 50%. The site also mentioned that the film also made business through satellite rights thus recovering the costs of the producers.