The NSE's banking sector index, Nifty Bank, gained for the sixth consecutive session to hit an all-time high of 29,812.00 on Monday morning. The gains were led by Kotak Mahindra Bank, Axis Bank, HDFC Bank, IDFC First Bank, and ICICI Bank.

Bank stocks have been the main beneficiaries of the recent pre-election rally seen in the Indian markets as a result of a rise in foreign investment in emerging economies. Since financial services make up for the highest share that is 37.18 percent on Nifty, any increase in the investment towards overseas exchange traded funds (ETFs) that puts money on Nifty index stocks would automatically benefit banks the most.

In the last week alone, Nifty Bank index gained close to 6 percent or 1,600 points, the sharpest weekly rise in the last couple of years.

Some analysts believe that besides foreign investments, an improvement in the asset quality of banks (especially concerns on Non-Performing Assets) that has increased expectations of strong recoveries in the coming quarterly results, could be the reason behind the surge. Additionally, the liquidity crisis in the non-banking finance companies may also be benefiting banks.

Meanwhile, the benchmarks Sensex and Nifty 50 rallied for the sixth straight session with the latter reclaiming the 11,500 levels in the morning session.