National Stock Exchange's index for public sector banks surged over 10 per cent as the NDA is set for a big win.
Canara Bank surged over 20 per cent, Andhra bank gained 16.27 per cent whereas Syndicate bank and Oriental Bank of Commerce both gained over 11 per cent on Friday as at 10 a.m.
NSE's PSU Bank index has gained 56 per cent in last three months compared to 18.70 per cent gain in Nifty.
Investors are betting on PSU bank shares as they anticipate new government may follow an influential recommendation by a panel appointed by the central bank to reduce its holdings in the lenders to below 50 per cent.
If the new government agrees to reduce its holding in PSU Banks then it will be easier for these banks to tap the capital market to boost their balance sheet.
Market participants also expect a revival in credit demand on account of a boost in corporate sentiment as a Modi-led government takes office at New Delhi.
PSU Banks have been struggling with bad asset quality and sluggish credit demand as the Indian economy is going through its decade low sub 5 per cent GDP growth.