"This is the people's victory, and it's a victory for honesty," Kejriwal told thousands of cheering supporters yesterday, adding that the huge mandate surprised him. "With people's support, we will develop a city that both the poor and rich will be proud of."

The results indicate a major swing against Modi since the last Delhi election 14 months ago, when his BJP topped Aam Aadmi by three seats and no party won a majority. Kejriwal, who ran Delhi for 49 days before abruptly resigning last year, promised voters cheap water, electricity, food and medicine.

While Delhi only accounts for about one per cent of all parliamentary seats, a defeat on this scale may embolden opposition parties who have seen Modi's party dominate national and state elections over the past year. He needs opposition lawmakers to support his moves to increase foreign investment and to help spur land purchases.

"It's a wake-up call to the BJP that tells them that they cannot take things for granted," said Devika Mehndiratta, an economist with Australia and New Zealand Banking Group.

"It is a reality check that would make them go ahead with a bit more of steam, be it the budget or other policy decisions that they have promised."

"History has been created in front us," Yogendra Yadav, a senior leader of Aam Aadmi, told party supporters. "It gives hope that through clean politics India's political system can be changed."

Modi has been nearly unbeatable since winning the biggest Indian election mandate in 30 years. His BJP had come first in three of four state elections since May, which are crucial to overcoming opposition in the upper house, the one national body it doesn't control.

"This is Delhi's election and it's not a referendum on the central government," M. Venkaiah Naidu, a member of Modi's cabinet, told reporters. "The BJP will review the reasons for the defeat and what needs to be rectified in the future."