Indian shares closed over 3% higher on Wednesday as value investors stepped in to buy beaten-down banking stocks, while Axis Bank surged after a report said private equity group Carlyle was in discussions with the lender for a fund infusion.
The Nifty banking index rose as much as 8.22%, with Axis Bank surging 14.2% and heavyweights HDFC Bank and ICICI Bank gaining 5.8% and 9%, respectively.
The index lost 8.3% last week and is down 41.8% so far this year, as banks that are already under pressure from over $100 billion in bad debt stare at more defaults by businesses hit by the COVID-19 pandemic.
Axis Bank shares rose as much as 15% during the afternoon session after The Economic Times newspaper reported private equity group Carlyle may invest $1 billion for an 8% stake in the bank.
The lender, which was the top gainer in the bluechip Nifty 50 index, said on Wednesday that it has not taken any decision regarding the Carlyle fund infusion.
"Buying was seen in some big private bank stocks, which led the rally. This sudden rise in prices also forced some investors to cover their short positions ahead of the derivatives expiry on Thursday," said VK Vijaykumar, chief investment strategist at Geojit Financial Services in Kochi.
The Nifty ended up 3.17% at 9,314.95, while the Sensex rose 3.25% to 31,605.22. The Nifty 50 index saw its best one-day gain since April 30, while the Sensex surged the most since April 4.
The Nifty information technology index was one of the top gainers, ending 2.8%, higher, led by a 3.7% surge in Infosys Ltd and a 3.2% gain in Tata Consultancy Services.