The Congress-led coalition eyed possible new allies on Monday after a decisive general election

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victory raised hopes of a stable government and sent financial markets soaring.

Prime Minister Manmohan Singh's coalition defied predictions of a tight election and was only about 11 seats short of an majority from the 543 seats at stake, according to election commission data, though the final count may see tiny changes.

In a country where unwieldy coalitions were becoming the order of the day and hobbling policy, the electoral verdict this time means Congress will call the shots in coalition building rather than being dependent on the goodwill of regional parties.

Congress' alliance took 262 seats, sweeping aside its nearest rival, the bloc led by the Hindu-nationalist Bharatiya Janata Party (BJP), which won only 159 combined.

A strong Congress-led coalition, free of pressures from its former communist partners, has boosted the prospect of reforms to encourage growth in Asia's third largest economy.

The confidence reflected on India's main stock index which rose 10 percent as trade opened, triggering circuit breakers and a one-hour halt in trading.

The 30-share BSE index rose 10.73 percent to 13,479.39 points.

The 50-share NSE index jumped 14.5 percent to 4,203.30.

The partially convertible Indian rupee also strengthened past 49 per dollar for the first time in three months and turned positive for the year on Monday, after the ruling coalition scored a clear victory in the general elections.

At its intraday high of 48.34 per dollar, it was up nearly 8 percent from a lifetime low of 52.20 hit in early March.

Benchmark bond yields dropped as the outcome encouraged foreign investors.

Congress, which alone won 205 seats, needs just a handful of partners to reach the 272 seats needed to take power, and is expected to seek the support of small parties or independents.

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Congress leaders will meet on Tuesday to officially endorse Manmohan Singh as prime minister, after which the party will meet its coalition partners to decide potential new allies.

The government will also have a strong mandate to deal with security issues in a region overshadowed by instability in Pakistan and Afghanistan.

"(Manmohan Singh) said that the new government will be assuming office in the backdrop of a deep global economic recession and serious troubles in India's immediate neighbourhood," Congress spokesman Janardhan Dwivedi said.

"He was confident that the clear mandate received by the Congress-led UPA alliance would have enabled the new government to respond to these two immediate challenges effectively."