The Congress has led the Central government for two terms and is facing widespread voter anger over corruption, slowing growth and stubborn inflation. (Agencies)
Its main opponent, Bharatiya Janata Party (BJP), was the clear winner in three big states that went to the polls.
Markets are closely tracking the outcome of the elections, considered a bellwether of support for the BJP's business-friendly candidate for prime minister, Narendra Modi. Bond, rupee and share prices rose last week after exit polls predicted a strong BJP performance.
However, it was unclear how far Modi's vigorous campaigning of recent months had contributed to the BJP's strong showing.
The Congress Party's poor performance in the state assembly elections may bring fresh pressure for an overhaul of its national campaign, which is headed by Rahul Gandhi.
Rahul is the next in line in a political dynasty that began with his great-grandfather Jawaharlal Nehru. Gandhi's campaign, focused on the Congress government's welfare programmes, has failed to capture the imagination of many of India's aspirational young voters.
However, the Congress played down ramifications of the state elections setback. "We accept the verdict of the people and we will introspect. This is by no means the full picture for the general elections,” said Congress minister Jayanthi Natarajan.
While the results are expected to add to the momentum Modi has built in dozens of packed rallies in the recent months, India's fragmented political landscape makes national elections harder to predict.
In three of the four state elections counted on Sunday, the election was a two-way race between the BJP and Congress, which is unusual in a country whose states are increasingly governed by powerful regional parties. In the past, strong state results have not always translated into success in national elections.
In Delhi, the one state which saw a three-way contest, the BJP's likely victory after 15 years of Congress rule was tempered by an unexpectedly strong showing by the debutant Aam Aadmi Party, which could deny it the majority required to rule.
"The Aam Aadmi Party has brought idealism into politics," said AAP activist Atishi Marlena. Final results were expected by early afternoon for the elections in Delhi, Chhattisgarh, Madhya Pradesh and Rajasthan.
BJP-ruled Chhattisgarh was the tightest race and the one possible bright spot for Congress, which had a slight lead in early counting. Congress has benefited from voter sympathy after much of its state leadership was wiped out in an attack by Maoist militants there earlier this year.
Mizoram is due to report results from its election on Monday. Exit polls forecast Congress lost ground there, as well, to local ethnic parties.
The Congress has led the Central government for two terms and is facing widespread voter anger over corruption, slowing growth and stubborn inflation.