Hopes that the Bharatiya Janata Party and its allies will win an outright majority have helped fuel gains in shares, given the perceptions that the opposition party is more business and reform friendly.
But broader gains in the rupee have been capped in recent sessions as the Reserve Bank of India has been an active buyer of dollars, according to traders.
Counting of votes will start at 0800 India time (0230 GMT), and traders estimate a national tally could be determined as early as 1130 India time (0600 GMT), although there is no certainty on the timings.
"There have been very good (dollar) inflows, if the election outcome is in line with market expectations, we could see rupee in the 58 territory tomorrow," said Uday Bhatt, a foreign exchange dealer with UCO Bank.
"The RBI could come in to prevent volatility but we will see the rupee gain if the outcome is positive while a negative shock can immediately take it past 60 to a dollar," he added.
The Reserve Bank of India has discussed contingency plans with the finance ministry and the stock market regulator to deal with any excessive volatility from election results to be unveiled on Friday, Governor Raghuram Rajan said on Thursday.
The partially convertible rupee closed at 59.29/30 per dollar, after hitting 59.10, its strongest level since July 29, and higher from its Tuesday's close of 59.66/67. The rupee rose 0.6 percent for the day, its biggest single-day gain since April 25.
Debt and foreign exchange markets were closed on Wednesday for a local holiday.
Gains in the rupee came as shares edged higher, with the broader NSE index ending at near the record highs hit on Tuesday.
Since the announcement of Narendra Modi as the BJP's candidate for prime minister on Sept. 13, foreign institutional investors have poured in a little more than $16 billion into debt and equity markets.
In the offshore non-deliverable forwards, the one-month contract was at 59.63, while the three-month was at 60.28.