Nifty Bank index roars back to record biggest daily gain in 3 years

"The support pledged by the allies has given confidence to the market as there were uncertainties around this. Some shorts being covered in banks due to weekly expiry has also driven the bank stocks up," said Deepak Jasani, Head of Retail Research at .

Within the banking pack, , , , , IDFC First Bank were all up over at least 4% intraday, while SBI clocked the least gains of around 2%.

Analysts expect investors to aggressively look at once the volatility eases out, where typically investors look for safe havens.

" were the ones where the alpha was being created. So, I do think that people will look for safer havens. The kind of total bravado that was there in the market on Monday has kind of evaporated. For now, people are looking at FMCG for safety. I think once the dust settles, people will look for it in private sector banks," said Atul Suri, Marathon Trends - PMS.

From a weekly strategy point of view, Bank Nifty has seen an increase in open interest of 13.23% with a decrease in price of -3.92%, indicating a short build up.

"Traders could initiate this spread strategy to make modest returns with limited risk and reward. The spread suggested consists of buying one lot of 47,000 strike PUT Option and simultaneously selling one lot of 46,500 strike PUT Option," said Axis Securities.

The rally today was broad-based, which trickled down to the banks, as benchmarks recovered almost half of their losses pocketed on June 4, following a surprise in the election outcome.

Historically, Nifty has delivered +9%/+8% return in the 3/6 months after Lok Sabha elections since 1991, showing that any correction in the past was followed by a rise in the longer run.

Following the fall on Tuesday, most analysts believe the dust will eventually settle down and that they should use the dips as buying opportunities.

Billionaire investor Mark Mobius said that the current fall may be a good time to hunt for quality stocks as the market slump may have bottomed out.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)