After a rough Tuesday, the Nifty Bank index made a huge comeback, marking its largest daily gain in over three years. This rally was led by strong performances from HDFC Bank, Bandhan Bank, and IndusInd Bank.
Bank stocks had dropped nearly 8% the previous day after the NDA’s performance in the Lok Sabha elections fell short of expectations, missing the 300-seat mark. However, support from NDA allies boosted market confidence and led to a surge in bank stocks.
Deepak Jasani, Head of Retail Research at HDFC Securities, explained, “The support pledged by the allies has given confidence to the market. Some shorts being covered in banks due to weekly expiry has also driven the bank stocks up.”
Major gains were seen in Axis Bank, ICICI Bank, Kotak Bank, PNB, and IDFC First Bank, all rising over 4% intraday, while SBI saw gains of around 2%. Analysts suggest that once the market volatility settles, investors will likely turn to private banks as safe havens.
Atul Suri from Marathon Trends – PMS noted, “PSU banks were the ones where the alpha was being created. For now, people are looking at FMCG for safety. Once the dust settles, people will look for it in private sector banks.”
From a strategic point of view, Bank Nifty saw a 13.23% increase in open interest with a 3.92% decrease in price, indicating a short build-up. Axis Securities suggested a spread strategy for traders to make modest returns with limited risk.
This rally helped benchmarks Sensex and Nifty recover almost half of their losses from June 4, following the unexpected election results. Historically, Nifty has shown positive returns in the months following Lok Sabha elections since 1991, indicating that any correction is typically followed by a rise in the longer term.
Many analysts believe that despite the recent fall, the market will stabilize, and dips should be seen as buying opportunities. Billionaire investor Mark Mobius also suggested that the current market slump may be a good time to hunt for quality stocks.
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