Analysts say traders had been building long positions on expectations the BJP would sail through in the results for the five state Assembly elections.

15. 30 pm Taking cues from the exit poll results that predicted a sweeping win for the BJP, the stock market started off with a bang but soon lost its fizz as profit booking set in.

The BSE Sensex closed at 20957.81, up 249.10 points, 1.20 percent. Nifty closed 6241.10, up 80.15 points or 1.30 percent.

The off-high close was also because the market has already factored in that the BJP is likely to win in 3 of the four state elections.

"The unfortunate part is that global markets have again started to correct and the tapering talk is coming back because of the strong data in the US. So, at some point of time after this euphoria dies down in two-three days, you would again get back to what is happening in the global markets. So, there should be some pressure there," Vibhav Kapoor, Director ,IL&FS, told CNBC TV18 today.

He feels beyond a point it will be difficult for the market to go up.

14:08 pm The rupee rose to a five-week high against the dollar and stocks jumped around 1.5 percent to near record highs as exit polls predicted a strong showing for the key opposition party in recent state elections.

The Nifty is likely to rally upto 6400-6450 if the result of the state elections favours the Bharatiya Janata Party (BJP), said Ambareesh Baliga, managing director, Edelweiss Financial Services in an interview with CNBC-TV18.

"Based on exit polls we should see a 100 point rally and I think another 100-200 points rally will come post December 8 if the results are in-line with the exit polls," Baliga said.

Confirmation of a strong showing by the opposition Bharatiya Janata Party when results are out on Sunday would be seen as bolstering its chances of victory in general elections due by May, according to analysts.

The BJP and its prime ministerial candidate Narendra Modi are perceived by many investors in India as being more business-friendly and willing to undertake reforms to tackle an economy growing at its slowest in a decade.

Recent data are signalling the economy may be bottoming out while the current account deficit has shrunk, adding to optimism in Indian markets despite concerns about a potential tapering in the U.S. Federal Reserve's monetary stimulus.

"Markets have already been performing well in India on the back of the notion that a BJP government will move forward more aggressively with investment in energy, infrastructure and overall capex," said Sacha Tihanyi, currency strategist at Scotiabank in Hong Kong, discussing a possible BJP victory in elections next year.

According to Franklin Templeton's Mark Mobius, India still has potential as its leaders can turn the ship around. But in his blog, Mobius cautions thatthere is too much bureaucracy, and the barriers to investment in India are still too high.

Sensex may be cheering BJP now but it's in for a rude shock in Dec

11:45 am The euphoria over exit polls will keep market enthusiastics hopeful about a a change in the political scene in the country, said Neelkanth Mishra of Credit Suisse, but maintained that both elections and US Fed's taper programme do not matter much.

He sees the broad trend will reflect the continued weakening of investment cycle and pressure on middle income consumption. The rude jolt to reality will come in the form of December quarter earnings which will see significant deterioration. However, overall sentiment will remain buoyant until April 2014, he said in an interview with CNBC-TV18.

"Exit polls are never as deterministic as they may seem right now," he added.

He further cautioned thatDecember quarter results will be a wake-up call."One will see a continued deterioration in earnings and it is very tempting for people to look at this as backward looking."

Sensex cheers BJP lead in exit polls, FIIs in wait-and-watch mode

11:am On Wednesday markets were nervous when Delhi went to polls but this morning Sensex soared 400 points with exit polls results showing the Bharatiya Janata Party (BJP) had an edge over the Congress in the five state Assembly elections held in November and December, it is expected markets would open firm on Thursday.

Mark Matthews, Bank Julius Baer told CNBC-TV18 that foreign Institutional investors (FIIs) will opt for a wait-and-watch approach towards the Indian equity markets before investing heavily into it.

UBS has set Nifty 2014 target at 6,900 and says it expects the index to trade between 5,500 and 6,900 for the year based on its valuations and FY15 earnings growth estimates of 10-15 per cent for the NSE index.

The investment bank added that tapering is not a big fundamental worry for the country, but a depreciating rupee may yet be a likely trend. UBS added that elections are the key theme for first half of 2014 and the recent rally implies that a Narendra Modi-led BJP government is no longer viewed as a low-probability scenario.

Sensex rallies on BJP sweep, market a sentimental beast?

10: am The market seems to be over reacting to the exit poll predictions as it is the actual results that matter. The results will only be released on Sunday. There is a probability that the market will retrace most of its gains on Monday.

The Delhi results are the key where the battle is between three parties- AAP, BJP and Congress. As Firstpost's R Jagannathan said yesterday, "Of the four results, the only one that really matters is that of Delhi, where it is clear that the Congress is out, but the Aam Aadmi Party (AAP) has put up a terrific enough show to possibly rob the BJP of a clear victory. We are probably heading for a hung assembly, and this is Arvind Kejriwal's crowning glory. The BJP's last-minute decision to dump Vijay Goel and choose Harsh Vardhan as its chief ministerial candidate may have come too little, too late. "

At 10 am, the BSE Sensex was up 378 points at 21086.90 while the Nifty was up 110 points at 6278.

"The market is looking for a strong, stable Government post 2014 elections and it seems that these results will likely make the market think that BJP could emerge as the lead party in the 2014 elections," said Bank of America Merrill Lynch in a report.

Sensex soars over 400 pts as exit polls predict BJP win

9:30 am Indian equity markets soared in opening trade following the exit poll results which showed that Narendra Modi led BJP is likely to sweep three out of four states that went to polls in the last few weeks.

While Sensex soared 441 points at 21150, Nifty was up 137 points up at 6297. Meanwhile, the ten year bench mark government bond yield was down at 8.74 percent and the rupee was trading at a month-high of 61.75 against the US dollar.

BSE Banking index soared 4 percent and all Nifty stocks were trading in the green.

ICICI Bank is the top performer in the Bank Nifty while Bank of Baroda is among the top Nifty gainers, up 4 percent

"From now to April, you will see more positive coverage in the media so the rally won't get derailed too quickly, but December quarter earnings will be a wake up call for markets because you will see more deterioration," said Neelkanth Mishra of Credit Suisse in an interview with CNBC-TV18.

Indian markets have rallied in recent weeks on signs the BJP's business-friendly candidate for prime minister Narendra Modi is gaining popularity.

The CNN-IBN post poll survey reveals that Shivraj Singh Chouhan is all set to score a hat-trick in Madhya Pradesh . In Chattisgarh, the contest appears quite close but Raman Singh is poised to retain the state. And a big upset is seen in Rajasthan where the BJP looks set to topple the Ashok Gehlot led Congress government.

According to Bank of America-Merrill Lynch note on assembly elections, a comfortable majority is likely for BJP in two states. Exit poll outcome is seen as positive for the market which is looking for strong and stable Centre.

Meanwhile, in the US, the equities market fell for fourth straight session as investors found few reasons to make big moves, with uncertainty remaining over when the Federal Reserve will start to slow its stimulus.

9:oo amExit polls predict BJP win: Nifty jumps 3% in pre-open, rupee at 61.75

The Indian markets are likely to jump following the exit polls results yesterday that showed that the Narendra Modi-led Bharatiya Janata Party (BJP) is likely to sweep three out of the four major states that went to polls in the past few weeks.

The BJP is expected to retain Madhya Pradesh, the biggest of the four states and comfortably trounce the Congress government in Rajasthan, the second biggest state.

Analysts say traders had been building long positions on expectations the BJP would sail through in the results for the five state Assembly elections.

The results are being closely watched by markets as a potential indicator of the mood of voters in the world's biggest democracy before the 2014 general election.

While the Sensex soared 293 points at 20992, Nifty jumped 101 points at 6236. Even the rupee opened stronger at 61.75 against yesterday's close of 62.05.

"The prospects of the BJP coming to power in most of the states will give a shot in the arm to the market. The indices are set to stage a rally at start. Ensure you stick to the quality stocks and don't get swayed by the temporary frenzy. Sentiment has been buoyed ever since indications were of a BJP looking stronger. The fact remains that based on election outcomes in states one cannot predict the general election results. For instance, the last three general elections saw results which were contrary to results in the immediate preceding assembly elections," said brokerage IIFL in a report.

Sudhakar Ramasubramanian, managing director, Aditya Birla Money told Business Standard, "Though a big BJP win has already been factored in by the market, there could be a positive reaction in the market, as the exit polls show some uniformity in the results."

Deven Choksey, MD and CEO, KR Choksey Shares and Securities is also of the same opinion. He told Economic Times, "If BJP wins elections in all four states, Nifty will hopefully hit 6,400 by next week. The index will hit 6,300 if they win in three states."

The mood clearly has changed since the last Assembly Polls in 2008.

In 2008, when Delhi, Rajasthan, Chhattisgarh, Madhya Pradesh and Mizoram held assembly elections, the results were declared on 7 December, a Sunday. On that occasion, the market was hoping for a 4-1 score line in favour of the Congress, since the consensus view was that a poor showing in state polls would hold the UPA government from pursuing further reforms, notes a CNBC-TV18 report.

Eventually, Congress won in three out of five states, losing Madhya Pradesh, as expected, and Chhattisgarh, in a closely fought battle. The following day, the Nifty and Sensex surged over 2 percent.

In another six months, General elections to the Lok Sabha will be held and the assembly elections to four out of the five states have been considered a crucial stepping stone to parties hoping to win the grand prize.

Foreign brokerages believe that India is currently in the midst of a Modi rally.

"Nomura expects a BJP-led coalition to form the next government at the Centre after the 2014 elections," political analyst at the Japanese brokerage, Alastair Newton, said in a note recently.

Nomura is the third multinational brokerage after Wall Street giant Goldman Sachs and CLSA to come out with an open political statement supporting the candidacy of Modi for the top political job in the country.

Goldman had also said that the recent market rally was driven by the Modi effect and had pegged the Sensex target for December 2013 at 23,000.

Even CLSA's Christopher Wood has repeatedly batted for Mr Modi in his column 'Greed and Fear'. "There is no doubt that what could be termed a Modi momentum is building in India... It is also clear that perceptions of Narendra Modi's prospects for the general election are rising by the day," Mr Wood had written in his column recently.

However, the market sentiment is still unclear. Some feel a BJP win would boost the benchmark indices, while others say that any political party with a clear mandate would be favourable for the markets.