The prosecution has said in court that it has no objection to conditional bail.

Ms Jayalalithaa, 66, was arrested for corruption late last month after being convicted by a Bangalore court.

Her trial was moved in 2001 to neighbouring Karnataka from Tamil Nadu to ensure it would be free of political influence.

Ms Jayalalithaa has appealed against her conviction and asked for bail. She is being represented by famous lawyer Ram Jethmalani.

Her supporters outside court and at her residence in Tamil Nadu erupted into celebrations as the hearing appeared to proceed in their leader's favour. Special prayers had been organized by members of Ms Jayalalithaa's party, the AIADMK.

Ms Jayalalithaa says she has wrongly been convicted of misusing her first term as chief minister from 1991 to 1996 to collect assets worth nearly Rs. 50 crore, which were incommensurate with her declared income.

Her conviction meant that as per last year's landmark Supreme Court order, she was immediately disqualified from office.

She was sentenced to four years in prison and penalized Rs. 100 crore; three of her aides, including live-in friend Sasikala Natarajan were also found guilty.

She has been replaced as Chief Minister by loyalist O Panneerselvam.