India's benchmark index, the Sensex, surged 900 points to cross 40,000 for the first time ever after early poll counts in the country's massive election put Modi's party and its allies in the lead. The Sensex gave up some of those gains later but continues to hover around the milestone.
The country's other major stock index, the Nifty, also hit record highs.
Modi swept to power in 2014 promising to give India's economy a shot in the arm by removing red tape and spurring domestic and foreign investment.
He's had some success in boosting India's image as an attractive investment destination for manufacturers and retailers, but other promises haven't panned out and growth and investment has slowed in recent quarters.
"The expectations of really big reforms from 2014 are a bit tempered now, but I think we'll see a broadly reform-minded and business-friendly government" if Modi comes back to power, said Shilan Shah, India economist at Capital Economics.
While no seats have officially been declared, the BJP was leading in 292 constituencies shortly after midday local time. The magic number of seats to gain a majority is 272, so if the early trends turn into concrete results, Modi's party and its allies will comfortably sail through.
Surprise landslide?
In 2014, the BJP secured 282 seats — the biggest majority secured by a single party in 30 years.
Stocks had already risen earlier in the week after exit polls indicated a victory for Modi's party, but investors were still expecting it to have to form a coalition government.
"No one priced in a BJP majority," Shah said.
Analysts say the election-day market surge is unlikely to last, however, as realities about the slowing global economy, trade disputes and tricky local issues return to the fore.
"One has to keep the uncertain global backdrop in mind and also the sluggish growth of the domestic economy," said Priyanka Kishore, India economist at Oxford Economics.
"When the dust settles, focus is likely to return to Modi's economic agenda and whether [he] will be able to deliver on the stalled land and labor reforms in his second term."
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