* NSE index up 0.90 pct, BSE index 1 pct higher
* Leads show BJP winning in Karnataka state elections
* Banks boost indexes
By Jessica Kuruthukulangara
May 15 (Reuters) - Indian shares traded higher on Tuesday, with banking stocks contributing to most of the gains, as Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) seemed likely to win the assembly elections in the southern state of Karnataka.
The BJP was leading against the main opposition Congress party as counting progressed, after an election seen as a measure of Modi’s popularity ahead of general elections next year.
“The major thing investors look out for is a stable government and a decisive mandate is something markets always take positively. Going by last few weeks’ trends, markets were factoring in a decisive win for BJP,” said Siddhartha Khemka, head of retail research at Motilal Oswal Securities.
Indian bonds and the rupee hit multi-month lows in early trade, as global crude oil prices inched up and the local inflation print came in higher than expected.
The 10-year benchmark bond yield rose 7 basis points to 7.90 percent, its highest in nearly 33 months, while the rupee fell to a near 16-month low of 67.7975 against the dollar before recovering sharply to 67.5350 on likely intervention by the central bank.
Government data on Monday showed India’s annual retail and wholesale inflation accelerated in April, mainly due to higher fuel and food prices.
The broader NSE index was up 0.90 percent at 10,903.70 as of 0536 GMT, while the benchmark BSE index was 1 percent higher at 35,912.95.
Both indexes gained more than 1 percent to hit their highest levels since early Feb.
The Nifty bank index climbed as much as 1.9 percent to hit its highest level since Feb. 2, on track for a third straight session of gains.
HDFC Bank Ltd gained over 2 percent to hit an all-time high.
Hindustan Unilever Ltd climbed as much as 2.6 percent to hit a record high after the diversified consumer goods maker reported an about 14 pct rise in profit on Monday, helped by higher sales in its home care business
Fortis Healthcare Ltd shares rose as much as 4.2 percent after Manipal Hospital and private equity firm TPG Capital Management sweetened their bid to buy Fortis.
Reporting by Jessica Kuruthukulangara in Bengaluru; Editing by Sunil Nair