Banking stocks experienced significant gains on Monday, with public sector lenders leading the rally. According to reports from The Economic Times, the Bank Nifty advanced 2.3% while the Nifty PSU Bank index gained 2.9%, both outperforming the benchmark Nifty which rose 1.3% to 24,031.70. The rally extended for the second straight session, with the index gaining more than 3% in the last two sessions. All 14 constituents of the Bank Nifty were trading in the green, as reported by TradingView News.
Union Bank of India emerged as the top performer with a surge of 5.3%, while other major public sector banks also posted strong gains. As reported by The Economic Times, Canara Bank, PNB, Bank of Baroda and AU Small Finance Bank gained between 2.7% and 4.6%. The sector's outperformance was driven by the decline in government bond yields, which provided relief to PSU banks that have been under pressure from elevated yields. The Nifty Private Bank index climbed 1.74%, indicating broad-based banking sector strength.
The crude oil prices fell below USD 100 per barrel for the first time in more than two weeks amid hopes of progress in US-Iran negotiations. According to TradingView News, US President Donald Trump said that Washington and Iran had "largely negotiated" a memorandum of understanding on a peace deal that could lead to the reopening of the Strait of Hormuz, a key route for global oil and LNG shipments. A fall in crude oil prices is seen as positive for India, which imports a large part of its crude oil requirement. Lower oil prices help reduce imported inflation, improve the fiscal position and ease pressure on the current account deficit.
Technical analysts remain optimistic about the banking sector's near-term prospects. Hitesh Tailor, Technical Research Analyst at Choice Broking, noted that Bank Nifty closed at 54,055.35, up 615.95 points or 1.15%, supported by sustained buying in banking stocks. The index rallied to an intraday high of 54,213.05 before settling firmly in positive territory. The RSI improved to 45.87, indicating gradual improvement in momentum, with immediate support placed around the 53,900-54,000 zone and resistance seen near the 55,400-55,500 range. Analysts expect softer inflation could give the Reserve Bank of India more room to maintain interest rates, which is viewed positively for banks and credit growth.
Despite Monday's gains, the Bank Nifty remains down 7.4% so far in 2026, as against the 8.1% losses in the Nifty, according to The Economic Times. However, the recent two-session rally suggests improving sentiment and potential recovery momentum. The performance gap highlights the sector's continued challenges, but the recent relief rally indicates that PSU banks may show stronger recovery potential due to their sensitivity to rate movements and government securities portfolios.
