CNBC's Inside India newsletter: Could markets sink even if Modi wins?

This report is from this week's CNBC's "Inside India" newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe  here.

India will be counting its political winners and losers in the coming days after the final phase of voting for the General Election concludes.

Separately, the stock market will also deliver its verdict when markets open on Monday.

Although the counting of ballots will only begin on June 4, exit polls by local media outlets are likely to pour in soon after voting finishes on Saturday.

Nervousness among investors over the results has meant that the India VIX index, the market's so-called fear gauge, has shot up by more than 135% since its April lows.

Investors are concerned that the government will be held back from implementing major economic reforms without a substantial victory for Prime Minister Narendra Modi's ruling BJP.

While the BJP-led coalition occupied nearly 350 seats — more than 60% — in the last Parliament, India headed to the polls with markets expecting the incumbents to win a record 400 seats.

A large majority would allow Modi to push through amendments to the constitution and reform land acquisition and labor laws, which analysts say are crucial for speeding up India's economic growth.

Traders pushed the benchmark NIFTY 50 index to an all-time high last week, closing above 22,967 points, hoping the election results would be as expected.

"With the index reaching new all-time-highs, the market is increasingly pricing out the risk of a negative surprise loss for the BJP-led coalition," Bank of America analysts said in a recent research note.

They suggest that the equity