Prime Minister of India Narendra Modi waves his hand after casting his vote during the presidential election, at the Parliament House on July 17, 2017 in New Delhi, India. Sonu Mehta | Hindustan Times | Getty Images

Exit polls from India's month-long parliamentary elections suggest that Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) and its allies are set to form the government again. Political consultancy Eurasia Group, however, said that election watchers should exercise some caution around those predictions. Local Indian media reported that exit polls predicted a clear majority for the BJP-led National Democratic Alliance. It is expected to win nearly or above 300 seats in India's lower house of parliament, or Lok Sabha as it is known, according to the Economic Times.

"The exit polls released are in line with our belief that Modi's BJP will be the single largest party, while it will have to rely on allies to form the government," Akhil Bery, South Asia analyst at Eurasia Group, said in a note on Sunday. "However, it is important to recognize that exit polls in India have not had the best history in predicting the elections." More than 8,000 candidates contested for a total of 543 seats in the elections. The polls spanned over seven phases, which began on April 11 and ended on May 19. To form a government, a party or a coalition needs to win 272 seats. Votes are set to be counted on May 23.

Every exit poll would need to be extremely wrong for a NDA coalition not to return. Akhil Bery South Asia analyst at Eurasia Group

Bery pointed to previous elections where exit polls either completely missed the mark or failed to accurately predict an outcome. In 2004, when the NDA was expected to win between 230 and 275 seats, they ultimately won only 187 seats and were unable to form the government, he said. In the 2014 elections, while exit polls predicted that the NDA would win, only one of them was able to accurately forecast the extent of Modi's victory, according to Bery. Still, the scale of the NDA's projected seat count would mean that "every exit poll would need to be extremely wrong for a NDA coalition not to return," he added. In April, before the elections began, opinion polls stated that Modi and his coalition were expected to win by a very slim majority. But some analysts pointed out that exit polls, despite being inaccurate in some cases, have a better track record than opinion polls.

Markets cheer

Indian markets cheered the exit poll numbers on Monday as the benchmark Nifty 50 jumped 1.71% in morning trade while the Sensex was up 2.1%. In the currency market, the strengthened against the U.S. dollar, trading at 69.60 at 12:06 p.m. HK/SIN — that was comparatively stronger than the 70.20 level the currency pair traded at late last week. The rupee's strength was reflective of a "higher likelihood of a strong mandate for the incumbent coalition and prospects of policy continuity," according to analysts from Citi.

Ahead of this week's final election results, Sonal Varma, managing director and chief India economist at Nomura, highlighted three likely scenarios, and their ramifications on India's policy and economic paths. In the event that the NDA is able to form a government with a clear majority, there would be policy continuity, she said. "Rural reflation, infrastructure spending, streamlining of the goods and services tax, direct tax reforms and the consolidation of public sector banks are likely to be key priorities," Varma wrote in a Monday note. If the NDA's power is reduced, the pace of reforms will likely slow, she added. On the other hand, a government led by the Indian National Congress and its allies could potentially lead to "policy paralysis" and stall progress on key reforms like the goods and services tax, Varma said.

Opposition mocks exit polls