The opposition Congress party swept to victory in 226 of the Andhra Pradesh assembly's 294 seats, the national election commission said on Tuesday.
It was a huge blow for the state government, one of the biggest proponents of India's technology revolution. Chief minister Chandrababu Naidu resigned immediately.
Exit polls, which show Prime Minister Atal Behari Vajpayee unlikely to win a majority on Thursday, dramatically underestimated the swing against his Bharatiya Janata Party (BJP) and its allies in Andhra Pradesh.
Ballots for the state, one of several that held assembly elections in tandem with the national poll over the past three weeks, were counted earlier because its new legislative assembly must be formed by Thursday.
Despite Naidu's nine year bid to turn the state into a high-tech centre rivalling Bangalore, benefits failed to trickle down to the millions of rural poor who ultimately decide the fate of governments in India.
Hundreds of desperately poor farmers unable to repay crippling debts have committed suicide in the past few years in the large farming state, which has also been racked by a long drought.
Naidu's Telugu Desam Party (TDP), which had 192 members in the outgoing assembly, secured only 49 seats in its worst performance. Naidu will stay on as a caretaker until a new government is formed.
Indian prime minister hopes to
capitalise on good harvest
His party was the largest ally in the the ruling federal coalition led by Vajpayee's Bharatiya Janata Party (BJP).
The BJP and TDP together held 36 of Andhra's 42 parliamentary seats. Based on early trends, news channel NDTV forecast the BJP-TDP alliance would retain just three federal seats, with five too close to call.
At the national level, Vajpayee's "India shining" campaign slogan based on strong growth and a good monsoon has also failed to impress many of the rural and urban poor who feel left out of the economic boom that has mainly helped the urban middle class.
But the BJP put on a brave face.
"The results of state polls will not influence results of national polls there," BJP spokesman Mukhtar Abbas Naqvi told a news conference in New Delhi. "We are confident that we will return to power with a clear majority."
Vajpayee called elections nearly six months ahead of schedule to capitalise on a booming economy, strong gains in state polls and prospects of peace with Pakistan.
Television exit polls after five rounds of staggered voting forecast the BJP-led coalition would win only 230-278 seats in the 545-seat lower house of parliament, meaning it could struggle to form a majority.
All results are to be announced on Thursday.