The BSE Sensex rose as much as 2.2 percent on Thursday to approach a record high after exit polls predicted a strong showing for the key opposition party in state elections held since November.
The gains were broad-based, with all components of both Sensex and the Nifty gaining.
Results for state elections are due on Sunday. Confirmation of a strong showing by the opposition Bharatiya Janata Party would bolster the chances of victory in general elections due by May, according to analysts. BJP is perceived by many investors as being more business friendly.
Still, opinion and exit polls have a patchy track record in India. Most surveys forecast the wrong outcome in the 2004 general election.
The Sensex rose to as high as 21,165.60 points, approaching a record high of 21,321.53 points hit on November 3. The index was up 1.94 percent at 9:29 a.m.
The broader NSE index rose 1.98 percent, after hitting a session high of 6,300.55 points, not far from a record 6,357.10 points hit on January 8, 2010.