Indian shares and the rupee ended higher on Thursday after the latest round of exit polls showed the pro-reform ruling coalition was closer to winning a majority in the national election than had been predicted last week.
Market sentiment, depressed by fears of political uncertainty following last week's polls, got a boost from exit polls on Wednesday which indicated the National Democratic Alliance (NDA) coalition had a slightly improved chance of mustering a majority.
But fund managers said further sharp market moves were unlikely until a clearer picture on the next government emerges after the final round of a five-stage voting process next week.
The Mumbai exchange's key index ended up 1.25 percent at 5,757.30 points, its highest close since April 27, moving further away from a five-week closing low on Monday.
Over the following week, the Mumbai index plunged nearly six percent to an intra-day low of 5,584.99 points on Monday, while the rupee fell as much as 2.2 percent to 45.03 per dollar.
But both shares and the rupee started to recoup losses on Tuesday, when opinion polls ahead of the fourth round suggested things were looking up for the NDA.
At its highest level on Thursday, the Mumbai index was over three percent above its Monday low, while the rupee had gained around 0.9 percent.
Foreign funds played a large part in a 73 percent surge in Indian shares last year, when Mumbai lagged only Thailand's benchmark index in Asia. Foreign inflows also helped drive bond yields to historic lows and lifted the rupee by 5.2 percent against a globally weak dollar in 2003.
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