The BJP and its allies won 292 seats while it was leading in 298 constituencies, Congress in 138 constitutencies and Left front in 46. The market is agog with rumour that Yashwant Sinha will return as the finance minister.

Thus, inflow of good news like hopes of a stable government and FIIs turning buyers, saw the bulls going on the rampage right from the opening session. The BSE Sensex closed the day at 4,963.10 points, marginally lower than the day's high of 4985. The stage is now set for the Sensex to touch the magic figure of 5000 on Friday. Though most market players and fund managers expected profit-booking to follow, they were positive on the prospects of the market reaching a much higher level.

"The upswing is sustainable," was how UTI Chairman PS Subramaniam reacted, stating that the government is committed to reforms and the agenda is clear.

On a day dominated by domestic operators, brokers and fund managers expect the next big push for the markets to come from the FIIs. However, the timing of a quantum jump in FII inflows will depend on the implementation of the reforms agenda, according to Simon Holdsworth of ITC Threadneedle.

FIIs have been booking profits over the last three months, but the selling pressure will abate. "A clear jump in FII investments will have to wait till January when fresh allocations are made," says Nilesh Shah of Templeton.

Ketan Desai of Asit C Mehta Investment Intermediaries sees the Sensex touching the 5050-level on Friday, followed by profit booking. "But this won't be a big reaction as investors are now expecting FIIs to enter the market again."

Ambreesh Baliga of Kotak Securities is bullish about the Sensex reaching a higher level. "Once the government settles down, one should start booking profits as harsh measures which have already become overdue, would come in in quick succession."

The bullish mood was also reflected in the GDR markets, with Skindia GDR index rising by over 5 per cent in mid-session. The euphoria was witnessed across the board on the domestic market, with the National Stock Exchange recording the highest turnover since its inception at Rs 4,020 crore. In the A group on the BSE, except Cadbury's, all scrips ended with a positive gain.

On the forex market, optimism returned with the news of Moody's upgrading the country outlook to positive. The rupee gained by 4 paise on Thursday to close at 43.52/53 against the dollar. With this, the currency has gained by 8 paise over the last 48 hours from Tuesday's close at 43.5875/5925.

Opening the day at 43.5450/55, the rupee continued to gain strength on the back of poll results favouring a BJP-led government at the Centre. The surprise in dealing rooms--which had discounted any isolatary impact of poll results on the rupee--was of Moody's Investors Service revised country ratings to positive from stable for India's Ba2 ratings on foreign and domestic currency debt.

"The forex market had discounted election results... but the move on the part of Moody's came as a pleasant surprise," a dealer with a European bank said.

In the forwards, premiums quoted softer across-the-board with a decline in call rates on the eve of Reporting Friday. The six-month annualised forward cover closed at 5.50 per cent (5.76 per cent) tracking a firmer spot-rupee and lower call rates.

Premiums ruled softer even as dealers spoke of "paying interest at lower levels". October premiums finished 12/13 paise (17/18 paise), while April dollars quoted at 129/131 paise (140/141 paise) and May at 148/151 paise (160/162 paise).

Gilt prices showed a slightly bullish trend on Thursday. The 11.90 per cent 2007 bond seen at Rs 102.87 (Rs 102.90) with 11.75 per cent 2006 was at Rs 102.60 levels (Rs 102.64). "The decline in call rates to 10-10.25 per cent levels helped bond prices reverse the bearish trend," a dealer said.