Bank stocks gained sharply on Friday amid broader market optimism, pushing the Nifty Bank index higher up more than 700 points (over 1%) to a one-month high level.

The Nifty Bank index jumped to 55,885, as seen at 10.30 am. Notably, this is the highest level the sectoral index has seen since May 7 this year. This came after US President Donald Trump said on Thursday that the US and Iran could sign a peace deal as soon as this weekend, which would reopen the Strait of Hormuz for shipping.

Speaking to reporters at the White House, Trump said, "We just made a great settlement of the war with Iran. The strait will officially open as soon as we sign, which could be soon, very soon, maybe over the weekend in Europe,” He added that Vice President JD Vance could sign on behalf of the United States. When asked if Iran's Supreme Leader Ayatollah Mojtaba Khamenei has approved the deal, Trump said, "I understand the answer is yes”, although Iran has countered the claim.

“Keeping up with his ludicrous inconsistency, President Trump backed off from his threat to “hit Iran very hard tonight” and declared that “we are close to a great settlement to end the war". How the agreement will pan out remains to be seen. But the good news is that Brent is sharply down to $ 89 with potential for more downside if the agreement becomes real,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.

He highlighted that the rupee will stabilise and strengthen mildly, as a result of the developments. Since FIIs are hugely short in the market, there will be short-covering triggering a rally. Bank Nifty has the potential to outperform, he added.

As a result of the renewed optimism, oil prices declined and rupee surged, boosting overall stock market with bank stocks being no exception. Union Bank of India, Canara Bank, Punjab National Bank (PNB), Bank of Baroda, Federal Bank, HDFC Bank and Yes Bank shares gained around 2% each.

State Bank of India (SBI), IDFC First Bank, Kotak Mahindra Bank and AU Small Finance Bank shares rose around 1% each. Axis Bank, IndusInd Bank and ICICI Bank shares were trading in the green with marginal gains.

What lies ahead?

Angel One had said that Bank Nifty will likely find resistance at 55,600 and 55,900 on the upside. The index has now comfortably breached the first resistance level suggested by the brokerage, and is heading towards the second mark of 55,900. On the downside, it placed support at 54,700 and 54,500.

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Vatsal Bhuva, Technical Analyst at LKP Securities noted that buying interest was seen from the lower levels in Bank Nifty during Thursday’s session, resulting in the formation of a bullish candlestick on the daily chart. “The index continues to sustain above its key short-term 20-day and 50-day moving averages, indicating that bulls remain active at lower levels. The ongoing contracting triangle formation suggests a potential breakout move ahead. A directional trade can be considered above 55,600. Immediate support is placed at 54,800–54,500, while resistance is seen at 55,600 and 55,800 levels,” he said.

Bank Nifty in the last two sessions witnessed profit booking from the neckline of the double bottom breakout area of 55,500-55,600, Bajaj Broking said. According to the brokerage, a decisive move above this level would confirm renewed buying momentum and open the path towards 56,500 levels in the coming weeks. Failure to do so will lead to some consolidation in the range of 53,800-55,600. “On the downside, immediate support is positioned at 54,000–53,800 being the low of the current week and key retracement of the recent pullback,” it added.

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