I have built water level indicator circuit as shown in this figure.
If the inputs of IC 74148 is connected directly to negative supply through pull up resistor it works, but if it is connected to negative supply through wires immersed in water it doesn't. Any Suggestion?
First bit of advice - ditch that circuit. It almost certainly won't work. As you've discovered, water won't do to make the connections. 7400 TTL circuits need a nominal 1.6 mA at 0.8 volts or less to produce a valid low input, or the equivalent of about 500 ohms. Water simply is not that good a conductor (unless maybe it's seawater). The pullup resistors add another .4 to .5 mA to the requirement, dropping the effective resistance requirement to about 400 ohms.
This appears to be a classic example of somebody having a neat idea and putting it on the internet without actually sitting down and analyzing it, let alone trying it.
You might try replacing the 74148 with a 74HC148, and raising the pullup resistors to 1 M. And maybe adding a little salt to the water if you have to.
However, there's a basic problem with this approach. Applying DC to contacts which are near water is a great way to accelerate corrosion, and the corrosion products often act as insulators. This has obvious bad effects. For long-term reliability you've got to use gold-plated contacts, and the voltage across them has to be AC.
