Banking stocks rallied on Thursday after the Reserve Bank of Indias overseas capital raising measures generated $136.38 billion in foreign currency inflows, significantly exceeding earlier expectations. The strong mobilisation improved liquidity conditions in the banking system and strengthened Indias external buffers, prompting broad based buying across the banking sector

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The Nifty Bank index rose 0.91 percent to 57,694.95 around 9:40 am, while the Nifty Private Bank and Nifty PSU Bank indices gained 1.17 percent and 1.14 percent, respectively. Banking stocks were among the strongest performers as investors responded positively to the improvement in foreign currency liquidity and external funding conditions.

Large private sector lenders led gains on the Nifty 50. ICICI Bank climbed 1.59 percent to Rs 1,449.20, Axis Bank advanced 1.55 percent to Rs 1,273.30 and HDFC Bank gained 1.28 percent to Rs 709.80. State Bank of India rose 0.92 percent to Rs 1,030.30. All four lenders featured among the top 10 gainers on the benchmark index.

The gains also extended to midcap banking stocks. Bank of Maharashtra jumped nearly 4 percent to Rs 85.25, while Punjab and Sind Bank gained 3 percent to Rs 23.31. Bandhan Bank advanced 2.32 percent to Rs 165.45 and Bank of India rose 2.04 percent to Rs 145.40. Four banking stocks were also among the leading gainers on the BSE Midcap index.

FCNRB deposits accounted for $127.23 billion of the total foreign currency mobilisation as of August 31. Overseas foreign currency borrowings contributed $5.26 billion, while external commercial borrowings added another $3.89 billion. The scale of inflows substantially exceeded market expectations and provided additional support to the countrys foreign exchange position.

The FCNRB deposit window closed on August 31, while the facility covering external commercial borrowings and overseas foreign currency borrowings will remain available until December 31. The RBI introduced the special measures in June to attract foreign currency inflows amid capital outflows, rupee weakness and elevated crude oil prices that had increased pressure on Indias external position.

The stronger foreign currency inflows also supported the rupee. The domestic currency appreciated as much as 0.7 percent to around Rs 94.27 per US dollar on Thursday, marking its strongest level in more than a month.

Broader market sentiment also improved following supportive global cues. Asian equities advanced after US President Donald Trump played down the prospect of a prolonged conflict with Iran. Brent crude paused its three day advance and traded around $95.50 a barrel, providing some relief to Indian assets that remain sensitive to elevated oil prices.

The improvement in risk appetite was reflected in lower market volatility, with the India VIX falling around 5 percent to 11.02. At around 9:40 am, the Sensex was higher by 303 points or 0.40 percent at 76,873.51, while the Nifty 50 gained 96 points or 0.40 percent to 24,010.90. Market breadth remained positive, with 2,232 shares advancing against 914 declines.

Among other sectors, the Nifty Realty index gained 1.51 percent and the Nifty Metal index rose 0.89 percent. In contrast, the Nifty IT index declined 1 percent and the Nifty FMCG index fell 0.46 percent.