Markets rebound on Shah's 400+ call

"The rebound in was largely due to improved sentiment following Amit Shah's statement that markets will move up after elections along with some bargain buying at 22,800 levels, especially after the sharp drawdown from higher levels," said Manish Chowdhury, head of research at .

The Sensex and Nifty have fallen around 2.5% since May 2 on worries that BJP - the Dalal Street favourite - may not secure as many seats as projected earlier in the general elections.

Selling by overseas investors has also weighed down sentiment. On Monday, (FPIs) net sold shares worth ₹4,498.92 crore, taking their sales tally for May to over ₹22,000 crore

Domestic institutions were buyers to the tune of ₹3,562.75 crore on Monday.

India's Volatility Index () - the 's fear gauge - jumped 11.5% to 20.6 on Monday, suggesting traders see more risks to equities in the near-term. In the past month, the volatility index has surged 65.2%.

"VIX is seemingly building in the lower seats than predicted at the start of the elections and the uninspiring Q4 results where the premium valuations are not justified, especially in the mid-cap and small-cap space," said Chowdhury.

VIX could remain elevated till the last leg of elections, said Jain. "The higher levels indicate possible sharp upward or downward moves and not just selling," he said.

Analysts said technical factors have supported the rebound in the market on Monday after the recent weakness.

"The Relative Strength Indicator (RSI), a momentum indicator, is indicating oversold levels at a lower time frame," said Ruchit Jain, lead research analyst at . "Nifty rebounded from the levels of 21,820 which is the 100-day exponential moving average and will be a crucial support level."

Jain said that if the level is broken then it could lead to unwinding of long positions.

“FIIs have a short heavy position currently, with net short positions of over 1,58,000 positions,” said Jain. “There could be some short covering action that also led to the rebound in the markets today.”

Out of the 4086 stocks traded on the BSE, 1707 rose, while 2,254 fell. The Nifty Mid-cap 150 index gained 0.5% and the Nifty Small-cap 250 fell 0.4%. “The texture of the market would change to sell on rise, only if markets move below 21,000 level,” said Chowdhury. “Till then, any dip can be used as a buying opportunity.”

Elsewhere in Asia, Hong Kong rose 0.80%, Indonesia gained 0.15 %, Taiwan ended 0.72% higher, China declined 0.21% and South Korea ended 0.02% lower.