The Bank Nifty index extended its recovery for a second consecutive session on Wednesday, rising around 2 percent as investors returned to banking stocks following a sharp three-day correction. The rebound comes after the index had fallen more than 7 percent in the preceding sessions, indicating a swift shift in near-term sentiment driven by both technical and macro triggers.

The latest move takes the index’s two-day gains to roughly 4.5 percent, suggesting that the recent decline may have attracted value-oriented investors, particularly in large-cap banking names. The recovery was broad-based, with both private and public sector lenders participating in the upmove.

Among the key contributors, HDFC Bank saw its shares rise 2.1 percent, building on the previous session’s 2.8 percent gain. The stock has been under scrutiny following developments around the resignation of its former chairman, with the bank reportedly engaging external legal firms to review the matter. While the issue remains governance-related, the market appears to be pricing in limited operational disruption, reflected in the stock’s recent recovery.

Mid-tier and PSU banks also showed strong traction. AU Small Finance Bank emerged as the top gainer within the index, advancing 3.44 percent, while Union Bank of India and IndusInd Bank posted gains of 3.1 percent and 3.94 percent respectively. The participation across segments indicates that the rally was not limited to defensive buying but extended to higher beta names as well.

A key driver behind the improved sentiment has been a shift in global macro signals. Reports of easing tensions between the United States and Iran, including discussions around a potential ceasefire, led to a decline in crude oil prices from recent highs. This has direct implications for inflation expectations in oil-importing economies like India, where elevated crude prices tend to pressure both fiscal balances and monetary policy outlook.

The cooling of oil prices has eased concerns around imported inflation and potential policy tightening, thereby improving the risk-reward equation for equities. Banking stocks, which are sensitive to both interest rate expectations and macro stability, typically respond positively to such developments. The rally also appears to have been aided by short covering, as traders unwound bearish positions following the sharp correction earlier in the week.

From a technical standpoint, analysts indicate that the index is attempting a near-term base formation after entering oversold territory. The relative strength index (RSI) has moved close to oversold levels, suggesting a potential for further pullback if key resistance levels are breached. Immediate support is seen in the 53,700–53,800 range, while resistance is placed around 54,300–54,400.

Other technical perspectives suggest that the 53,000–53,100 zone remains critical for confirming the sustainability of the current rebound. A decisive move above this band could extend the recovery towards higher levels, while failure to hold support near 52,200–52,100 may reintroduce downside risks.