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Indian stock markets hit record highs while the rupee and bonds rallied as early vote counting in general elections showed the ruling National Democratic Alliance with Narendra Modi at the helm winning a second term.

The NDA led by Prime Minister Modi's Hindu nationalist Bharatiya Janata Party (BJP) was ahead in 324 seats, with the opposition United Progressive Alliance winning in 111, at 0430 GMT, about two hours after counting of about 600 million votes began, TV channel NDTV said.

Exit polls had predicted a clear win for Modi in the election that ended on Sunday, but such polls in India have sometimes proved misleading.

The ruling coalition is projected to win between 339 and 365 seats in the 545-member lower house of parliament with the Congress-led opposition alliance getting 77 to 108, an exit poll from India Today- Axis showed.

Investors broadly view the NDA and Modi as more pro-industry than the opposition-led Congress.

Modi's government has had mixed success in its first term, facing criticism for slowing growth and a failure to create jobs while winning plaudits for implementing tough tax and banking reforms and infrastructure spending.

Investors expect a second term will give him time to carry through those reforms while pushing for more fiscal and monetary stimulus. The opposition fought the election on a policy platform promising better farm income and jobs.

The broader NSE index was up 2.55% at 12,036.75 as of 0515 GMT, while the benchmark BSE index was 2.59% higher at 40,123.86.

The NSE index rose 64.8% during Modi's first term, through Wednesday's close, and the BSE index gained 63.6%.

The partially convertible rupee was trading at 69.51/52 per dollar versus previous close of 69.6750.

"As expected markets have rallied but for this rally to sustain concrete steps are needed to address liquidity and credit stress," said Rajeev Pawar, a group head at Edelweiss Financial Services.

"Revival, reflation and reform should be the mantra going ahead," he added.

BONDS AT YEAR HIGH

Low inflation, ample liquidity support from the central bank and expectations of easier monetary policy was helping sentiment for the bond market.

The benchmark 10-year bond yield was down 5 basis points at 7.21% after touching 7.19% earlier, its lowest level since April 9, 2018.

"Supply concerns remain but those will be there at all times for this year. RBI has done 250 billion rupees worth of OMOs so far. They need to maintain the tempo," said Bekxy Kuriakose, head of fixed income at Principal Asset Management.

Investors said health of corporate and financial sector is going to be of paramount concern and steps to address these issues need to be taken by the new government and the central bank.

"At a time when there is uncertainty over economic growth, political stability and continuity allow an economy to progress and rise above hurdles over a period of time," Sachin Shah, fund manager, Emkay Investment Managers.

"So this outcome offers hope that policy reforms will go in the right direction."