BENGALURU: Indian shares jumped over 3% on Wednesday, marking its best one-day gain in over three years after key allies pledged their support to form a new government following a narrow win for Prime Minister Narendra Modi’s alliance.

The NSE Nifty 50 index ended up 3.4% at 22,620.35 points and the S&P BSE Sensex rose 3.2% at 74,382.

The Nifty saw its best percentage gain since Feb 1, 2021, when union budget-related announcements drove the market up nearly 5%.

Prime Minister Modi is expected to be sworn-in for a rare third term on June 8, after the Telugu Desam Party and Janata Dal (United) pledged their continued support a day after a humbling election verdict saw his Bharatiya Janata Party lose its majority in parliament.

The benchmark indexes closed nearly 6% lower on Tuesday, recording its worst session since March 2020.

“The support pledged by the allies has given confidence to the market as there were uncertainties around this,” said Deepak Jasani, head of retail research at HDFC Securities.

Heavyweight bank stocks surged 4.5%, while the financial services index jumped 4.2%. Both the indexes dropped nearly 8% on Tuesday.

The Nifty Volatility Index, a gauge for domestic market volatility fell to its lowest since May 27 at 18.66.