India's largest lender had a spectacular rally of of 4.38% on Thursday and with today's gains, the stock has gone up by almost 8% in two days.

According to marketmen, there has been huge interest from foreign institutional investors in the counter on hopes of favourable financial performance in the next few quarters.

The Reserve Bank of India (RBI) is also expected to ease monetary tightening in the next few months, which has helped sentiments for banking stocks. It is largely believed that the RBI would cut rates or reduce the cash reserve ratio (CRR) requirement further.

This has sparked off a rally in banking stocks and public sector banks, have been the biggest movers amongst banking stocks.

Cut in cash reserve ratio and repo rates, helps improve liquidity, reduce interest rates and ensure lower non performing assets for banks. Net interest income for banks also shows an improvement.

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