Diwali Dhamaka: Sensex & Nifty Surge as Bank Stocks Light Up Dalal Street

Indian equity markets delivered a spectacular Diwali gift to investors on Monday, October 20, 2025, with both benchmark indices hitting fresh 52-week highs amid robust earnings from blue-chip companies and a stunning rally in banking stocks that lifted the Bank Nifty to an all-time record.

The BSE Sensex closed at 84,363.37, gaining 411.18 points or 0.49%, while the NSE Nifty 50 settled at 25,843.15, up 133.30 points or 0.52%. This marked the fourth consecutive session of gains, with both indices now less than 2% away from their all-time peaks scaled in September 2024.

But the real fireworks came from the banking sector. The Bank Nifty index stole the spotlight by hitting a new lifetime high for the second consecutive session, closing at 58,033.20—a testament to the surging investor confidence in financial stocks after heavyweight lenders announced impressive quarterly results over the weekend.

Reliance and Banking Giants Power the Rally

The day’s rally was led by Mukesh Ambani’s Reliance Industries, which surged 3.52% to close at Rs 1,467 after reporting a 10% year-on-year increase in consolidated net profit to Rs 18,165 crore for the September quarter. The conglomerate’s strong performance across its oil-to-chemicals, retail, and telecom segments impressed analysts, with most brokerages maintaining or raising their target prices.

Bajaj Finserv, Cipla, Shriram Finance, and Dr Reddy’s Labs were among the other top Nifty gainers, while ICICI Bank, Mahindra & Mahindra, Adani Ports, and JSW Steel lagged behind.

HDFC Bank, India’s largest private sector lender, rose modestly after posting an 11% year-on-year jump in net profit to Rs 18,641 crore for Q2 FY26. The bank’s stable earnings and improving asset quality—with gross NPA ratio declining to 1.24%—drew positive reactions from analysts, even as its net interest margin compressed slightly to 3.27%.

ICICI Bank, however, bucked the trend, dropping 3.2% despite reporting a 5.2% rise in net profit to Rs 12,359 crore. Investors appeared to react to the bank’s slower loan growth momentum compared to HDFC Bank, despite its strong asset quality improvement with gross NPA falling to 1.58%.

PSU Banks Steal the Show with Historic Surge

The real story of the day, however, was written by public sector banks. The Nifty PSU Bank index exploded 2.87% higher—its sharpest single-day gain since May 30, 2025—following robust quarterly earnings from several state-owned lenders.

Punjab National Bank climbed 3.9%, State Bank of India (SBI) added 2.1% and hit a fresh all-time high, with its market capitalization crossing Rs 8 lakh crore to overtake HDFC Bank temporarily. Bank of Maharashtra surged 4.47%, Indian Bank jumped 4.29%, and Canara Bank gained 2.95%.

Among mid-sized private and small finance banks, the gains were even more dramatic. AU Small Finance Bank rocketed 9.13% after posting better-than-expected Q2 results, while Federal Bank soared 7.39% and IDFC First Bank climbed 6.38%. DCB Bank jumped 13.43% on strong operational metrics and lower credit costs.

But the standout performer was RBL Bank, which skyrocketed 9.05% after announcing a landmark $3 billion (approximately Rs 26,850 crore) investment from Emirates NBD Bank, the second-largest lender in the UAE. This marks the largest-ever foreign direct investment in India’s banking sector and will see Emirates NBD acquire a 60% controlling stake in RBL Bank through a preferential share issuance.

The deal, expected to close within 5-8 months subject to regulatory approvals, will boost RBL Bank’s net worth to approximately Rs 42,000 crore, transforming it into one of the best-capitalized banks in India. Emirates NBD’s India branches will eventually merge with RBL Bank, creating a powerful new force in the Indian banking landscape.

Sectoral Performance: Broad-Based Gains

Beyond banking, the market saw broad-based participation. The BSE Midcap index advanced 0.7%, while the BSE Smallcap index gained 0.6%. Among sectoral indices, PSU banks led the charge with a 3% surge, followed by oil & gas and telecom stocks, which rose 1% each. Pharma, realty, metal, and IT sectors also closed with gains of around 0.5%.

Tyre major CEAT surged 12.16% after reporting a 53% jump in net profit for Q2, while Chennai Petroleum Corporation gained 7.18%. South Indian Bank led all gainers on the BSE, soaring 16.72%.

The Nifty Auto index was the only major laggard, declining 0.16%, with Mahindra & Mahindra falling more than 1%.

What’s Driving the Optimism?

Market analysts attributed the sustained rally to a confluence of positive factors:

Strong Corporate Earnings: Better-than-expected Q2 results from major companies, particularly in the banking and oil & gas sectors, have lifted sentiment significantly.

Foreign Inflows: After three consecutive months of selling, foreign institutional investors (FIIs) have turned net buyers in October, with improved inflows supporting the rally.

Festive Cheer: The Diwali week traditionally brings optimism to Indian markets, and this year has been no exception, with investors positioning themselves ahead of the auspicious Muhurat Trading session on Tuesday.

Improving Global Cues: Easing trade tensions between the US and China, along with a stronger Indian rupee and moderating crude oil prices, have further boosted investor confidence.

Banking Sector Momentum: The rally in banking stocks reflects improving margins, declining non-performing assets, and the RBI’s accommodative policy stance, which is easing liquidity conditions.

Vinod Nair, Head of Research at Geojit Financial Services, noted: “The Indian market extended its positive momentum, driven by better-than-expected Q2 results from major companies and festival optimism. PSU banks and mid-sized financial services led the charge, benefiting from potential acquisitions and improvement in margins & asset quality as per Q2 results.”

Technical Outlook: Bulls Firmly in Control

From a technical perspective, the Nifty 50 is now trading comfortably above all key moving averages, signaling a robust uptrend. The index has successfully broken past its falling resistance trendline and the June swing high, suggesting strong momentum.

Sudeep Shah, Head of Technical Research at SBI Securities, commented: “The Nifty 50 continued its upward trajectory, closing the session with a gain of 0.54%, comfortably above the 25,800 mark. This marks its highest closing level since September 2024, bringing it close to its all-time high.”

Technical analysts are now eyeing the psychological milestone of 26,000, with potential extension toward 26,200 if the index sustains above 25,700. On the downside, immediate support is placed at 25,750-25,700.

For Bank Nifty, which closed at a fresh all-time high of 58,033.20, analysts see further upside potential toward 58,500-58,900 in the short term, as long as the index holds above 57,600.

The advance-decline ratio was firmly in favor of bulls, with 2,217 shares advancing against 1,648 declining on the BSE. About 282 stocks from the Nifty 500 universe ended the day with gains, underscoring the strength and breadth of the rally.

What to Watch Next

As markets gear up for the Muhurat Trading session on Tuesday evening—a one-hour special trading window from 1:45 PM to 2:45 PM considered highly auspicious—investors will be closely monitoring several key developments:

Q2 Earnings Continue: More companies are scheduled to announce their September quarter results this week, which could either sustain or dampen the current momentum.

FII Flow Trends: Whether foreign investors continue their buying spree or revert to selling will be critical for near-term market direction.

Global Cues: Any escalation in geopolitical tensions or changes in US Federal Reserve policy could impact sentiment.

RBI Policy Outlook: The central bank’s stance on interest rates and liquidity management will remain in focus, especially given the strong performance of banking stocks.

Technical Levels: Traders will watch if Nifty can decisively break above 26,000 or faces resistance at current levels, leading to consolidation.

Banking Sector Momentum: With Bank Nifty at all-time highs, profit booking could set in, or the rally could extend if more positive earnings surprise emerge from mid-sized banks.

RBL Bank-Emirates NBD Deal: Progress on regulatory approvals and shareholder response to this landmark transaction will be monitored closely.

Ajit Mishra, SVP Research at Religare Broking, advised: “The continued buoyancy in the banking pack, coupled with rotational buying across other sectors, is driving the index higher with each passing session. As the Nifty approaches the 26,000 mark, some consolidation cannot be ruled out before a fresh breakout; however, the overall bias remains positive.”

Conclusion

Monday’s market action delivered a fitting Diwali gift to investors, with Indian equities lighting up Dalal Street in spectacular fashion. The combination of strong corporate earnings, surging banking stocks, robust foreign inflows, and festive optimism created the perfect recipe for a broad-based rally.

As the markets prepare for the symbolic Muhurat Trading session and usher in Samvat 2082, investor sentiment remains buoyant. However, with benchmarks now hovering near record highs and several technical indicators approaching overbought territory, some caution may be warranted in the near term.

For now, though, the bulls are firmly in control, and the historic rally in PSU banks—coupled with landmark deals like the RBL Bank-Emirates NBD transaction—signals growing confidence in India’s financial sector and its long-term growth potential.

This article is only for information purposes and is not investment advice. Before investing, do your own research.