Indian shares have hit a record high as the main opposition party, seen as business friendly, won an absolute majority in state elections.
The Hindu nationalist Bharatiya Janata Party (BJP) won 162 assembly seats in the northern state of Rajasthan, leaving the ruling Congress with just 21 seats.
India’s rupee also hit a four-month high against the US dollar.
The main share index, the Sensex, was 2.3% higher before ending up 1.6%.
It reached 21,483.74 points during trading on Monday but closed a few notches lower.
This marks a turnaround from August this year, when the Indian rupee fell to a new all-time low against the US dollar amid concerns about the prospect of scaling back quantitative easing in the US.
The news may bolster the BJP’s chances of winning India’s general election in May 2014.
A briefing note by Nomura to its clients said: “The BJP is considered more right-of-centre, pro-business and reform-oriented.”
It added: “The fact that runaway spending by the ruling party has not won any votes could be taken as a very positive signal by the markets in terms of voter preference for the kind of policy favoured by the electorate.”
Shares in the industries widely considered to do well from a BJP win in next year’s elections, such as infrastructure and construction, did particularly well.
Sonam Udasi head of research at IDBI Capital, said: “The markets have risen on the hope that the BJP can come in with decisiveness in the general elections in May.”
These results will be not be welcomed by the ruling Congress party, which has recently been trying to attract foreign investments to boost the economy.
Leader of the Congress party, Sonia Gandhi, said: “We will introspect and take action to rectify our mistakes.”
She called an emergency meeting of party officials.