Markets favour a stable government and until Sunday owing to uncertainty over the general elections, trading was marked by heavy volatility.

On Monday, the Indian VIX or the volatility index saw a sharp drop of over 17.55 per cent. The index came down to 23.14 from the 28-29 levels as investors cheered the exit polls.

The Sensex advanced over 980 points during the early trade hitting an intra-day high of 38,909.79.

"Post the Exit Polls we can expect Nifty to again test its recent high before May 23. Fresh breakout into the 12,000 to 12,500 zone would depend on whether the BJP gets majority on its own," said Rusmik Oza, Head of Fundamental Research, Kotak Securities.

At 10.30 a.m., the Nifty was trading at 11,679.15, up 272 points or 2.38 per cent. It opened at 11,651.90 from its previous close of 11,407.15.

"If exit polls come true on May 23, then we can expect a structural up move in the mid and small cap space," Oza added.

The BSE Sensex was trading 926.87 points or 2.44 per cent higher.

The benchmark Sensex opened at 38,701.18 from its previous close of 37,930.77.