The Indian stock market has shot up by more than 5% in the financial capital Bombay, after the BJP-led National Democratic Alliance secured a clear majority in parliament.

The market was also upbeat after the upgrading of India as an investment destination by Moody's, the international credit rating agency.

It was a day of rare frenzy in the Indian capital markets.

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The Bombay stock exchange sensitive index closed at an all-time high of 4,963 points, up more than 5%.

On the National stock exchange, the gains were even sharper and many stocks closed at an all-time high.

Observers attribute this to the markets' perception that the NDA's victory should result in the formation of a more stable government than last time.

Pro-reform

The stock markets also appear to be pleased with the pro-reform economic policies of some of the bigger allies of the BJP in the NDA.

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One of them is the Telugu Desam party in the southern state of Andhra Pradesh, which is certain to be the second-biggest party in the NDA after the BJP.

The TDP is led by the computer savvy Chief Minister, Chandrababu Naidu, who has a business friendly image.

The business community expects the new government to speed up economic reforms.

The Finance Minister, Yashwant Sinha, recently said the opening up of India's insurance sector, and other measures to usher in the second wave of reforms, would be high on the BJP's priority list.

The stock markets also expect more foreign investment to flow in once a more stable government is in place.