Second-rung banking stocks found favour with the market on Monday on the reckoning that these banks seem ripe for merger and acquisition activity as of now.

This reckoning sent stocks like Karur Vysya Bank (up 6.34% to Rs 193.75), Karnataka Bank (up 4.51% to Rs 63.75), Bank of Punjab (up 2.17% to Rs 16.50) and Federal Bank (up 3.70% to Rs 116.25) spiraling.

But it is the operators who are pushing up these stocks it is believed. Increased activity in this segment was set off by Bank of Muscat's recent acquisition of 26% stake in Centurion Bank for Rs 75 crore . Now, all private sector banks seem likely targets for MNCs. The government had hiked foreign direct investment limit in private banks to 74% from 49% .

Overall, the banking sector has been impressive in terms of performance and future prospects. Besides, market players have now shifted much of their portfolio to banks from the ailing tech sector.

To boost banking prospects further, the Securitisation Act has turned market attention to bank stocks full throttle. The Securitisation Act allows lenders to attach assets of defaulting borrowers without having to go to court for the purpose. The Act paves the way for the setting up of asset reconstruction companies to recover non-performing assets. Hitherto, archaic laws, tilted in favour of borrowers, made recovery of debts a difficult task for banks and financial institutions. Any recovery of debt will boost bottom lines of banks, it is contended.

Punjab National Bank (up 6.82% to Rs 132.30), Bank of Baroda (up 4.89% to Rs 92.25), Andhra Bank (up 4.56% to Rs 34.40), Oriental Bank of Commerce (up 4.29% to Rs 113), J&K Bank (up 4.35% to Rs 176.30), Canara Bank (up 4.07% to Rs 97.25) and Syndicate Bank (up 3.72% to Rs 23.70) were some banks that were trading in positive territory on Monday.