The rupee strengthened past 48 against dollar for the first time in nearly five months to trade at 47.88 at 12.30 pm, after the ruling UPA coalition won a decisive mandate and the stock market surged 17.2% on Monday morning.

This level is its strongest since December 26, 2008 and up 3.3% from Friday's close of 49.41. Incidentally this is the highest rise by the rupee against the dollar in more than a decade.

This is despite the dollar rising against a basket of currencies on Monday, while the yen gained broadly and hit a two-month peak versus the greenback, as falling global stock markets prompted to make a run for safer currencies.

The yield on the most-traded 6.05% note due February 2019 dropped 18 basis points, or 0.15 percentage point, to 6.24 percent in Mumbai, according to CCIL.

"Its the hopes of capital inflows that is taking the rupee higher," says Devendra Kumar Das, a dealer at DCB.

"Bonds have run out of breath on fears of RBI introducing a new 10-year benchmark paper. Besides there will be an auction this weak, which will suck out some liquidity," he said.