Banks such as Bank of Baroda, Bank of India, Andhra Bank, State Bank of India, Oriental Bank of Commerce, Canara Bank, J&K Bank and Vysya Bank are the majors gainers in the rally, while the new generation banks like IDBI Bank, HDFC Bank and ICICI Bank have recorded only marginal gains.

It is expected that Union Budget 2003-04 is likely to hike the foreign direct investment (FDI) in the public sector (PSU) banks to 49 per cent from the existing 20 per cent and the ceiling on FDI-holding in private sector banks may be hiked to 100 per cent. Relaxation in banking regulations and liberalisation of PSU banks to make them more efficient are also on the cards.

Bank of Baroda has been the biggest gainer, appreciating 21 per cent to close at over three-year highs of Rs 83. Andhra Bank followed due to massive institutional buying and gained 19 per cent to close at Rs 29.

SBI spurted 4 per cent to Rs 311 on news that the government may exclude its global depository receipts limit from the total foreign institutional investor limit of 20 per cent. It touched a six-year high of Rs 315.

Other major gainers have been Oriental Bank of Commerce, Canara Bank and Karur Vysya Bank which gained over 10 per cent.

According to SBI officials, another factor that has been instrumental in pushing up banking stocks is soft interest rates. In the recent credit policy announcement, the Reserve Bank of India slashed the benchmark bank rate by 25 basis points, prompting other banks to follow suit.

The bull-run in the banking stocks halted temporarily at the beginning of February 2003 due to heavy profit booking. They have bounced back into focus during the week started 14 February on expectations of some positive announcements from the upcoming budget, according to a Canara Bank official.