The BSE Sensex jumped by a healthy 1421.90 points or 3.75 per cent, closing at 39,352.67, just short of the its lifetime high.
Markets favour a stable government and until Sunday owing to uncertainty over the general election, trading was market by heavy volatility.
On Monday, the Indian VIX or the volatility index saw a sharp drop of over 15 per cent. The index came down to 23.6 from the 28-29 levels as investors saw a major hurdle pass.
As the banks starred in the rally, touching a 52-week high, further upmove is on the cards, analysts noted.
"The market elevated to near record high while the rupee strengthened as exit polls predicted a landslide victory for the ruling government. Short covering and value buying were seen in many beaten down stocks and sectors in expectation of continuity in policies and reforms," said Vinod Nair, Head of Research, Geojit Financial Services.
"The rally was broad-based where banks and infrastructure outperformed. Global market was mixed due to trade tensions and rise in oil prices as OPEC is likely to maintain production cut in 2019."
Among the stocks which made the best of the day's rally was IndusInd Bank. The private lender surged by 8.64 per cent. State Bank of India jumped by 8.04 per cent, followed by Tata Motors, Tata Motors (DVR) and Yes Bank.
Even the grounded Jet Airways jumped by 5.88 per cent to Rs 131.40 a share.
"Once the noise around election results die down, the market participants will be keen to watch the steps taken by the government to stimulate demand, boost consumption, revive capex and hence recuperate economic growth," said Devang Mehta, Head, Equity Advisory, Centrum Wealth Management.