India's ruling nationalist Bharatiya Janata Party's win in three out of four major state elections will boost sentiment in the country's equity markets, potentially drawing higher foreign inflows on confidence in political stability, analysts said.

The results will also reduce the risk of fiscal populism ahead of national elections next year, they added.

Prime Minister Narendra Modi's BJP wrested Rajasthan and Chhattisgarh from the main opposition Congress and retained Madhya Pradesh, marking a better than widely expected result, defying predictions of a close contest.

"While we saw no probability of BJP losing central elections, state election outcome adds confidence ... These developments along with peaking of interest rates globally, bodes well for FII flows," PhillipCapital analyst Anjali Verma wrote.

Analysts had last week urged investors to hedge their portfolios using options ahead of the results on expectations of a close contest.

Various national economic issues like inflation, unemployment and mixed consumption pattern have not reached a point to pose electoral challenges to BJP, Citi analysts said.

India's blue-chip Nifty 50 index and BSE Sensex have gained about 13.4% and 12.4%, respectively this year. They added 1.4% after opening at record highs on Monday.

While the state election outcomes have shown no correlation with national polls in the past, the latest results mitigate the threat of political uncertainty over the markets for the next five months, Motilal Oswal analysts said.

"This augurs well for macro and policy momentum for India, which, at the moment, is seeing the highest growth among major economies," Motilal Oswal said.

Indian economy is projected to grow at a 6.7% -7% rate in the fiscal year ending March 31, 2024, several economists said, upgrading their estimates after the country blew past growth expectations for the July-September quarter.

The results will also ease fears of fiscal populism in the run-up to the general elections.

"After the state election results, there is no significant pressure on the central government to announce a large fiscal stimulus in the February interim budget before the national elections," Citi analysts said. (Reporting by Sethuraman NR in Bengaluru; Editing by Dhanya Ann Thoppil)