HDFC Bank, HDFC Bank share price, HDFC Bank FII limit, private banks FDI policy, sensex, nifty, Indian stock markets
The headquarters of India's HDFC Bank is pictured in Mumbai, India, December 4, 2015.Reuters File

Shares of HDFC Bank rose as much as 9.25 percent in early trade on the BSE on Friday in response to the Reserve Bank of India (RBI) lifting the cap on foreign investors to buy shares of India's second-largest private sector lender. The stock was trading at Rs 1,421, up 7.09 percent at around 12.27 pm, while the BSE Sensex was up 280 points at 28,581. HDFC Bank market capitalisation rose to Rs 3,63,429 crore on Friday as against Rs 3,33,728 crore last Friday (February 10, 2017).

Read: HDFC Bank employee strength falls sharply between Q2 and Q3 in FY2017

According to the RBI's existing foreign direct investment (FDI) policy, foreign ownership in private banks cannot exceed 74 percent. The shareholding fell below the threshold, prompting the RBI to lift the restrictions on Thursday evening, leading to a spurt in HDFC Bank share prices.

The gains lifted the BSE Bankex index by 2.11 percent, aiding a rally in share prices of other private sector lenders such as Federal Bank, Yes Bank, IndusInd Bank and Kotak Mahindra Bank. ICICI Bank, India's largest private sector lender, was trading marginally higher at Rs 281.

"...the aggregate foreign shareholding through American Depository Receipts/ Global Depository Receipts/ Foreign Institutional Investors (FIIs)/ Foreign Portfolio Investors (FPIs)/ Foreign Direct Investments (FDI)/ Non-Resident Indians (NRIs)/ Persons of Indian Origin (PIOs) in the Bank has gone below the prescribed limit stipulated under the extant FDI policy. Hence the restrictions placed on the purchase of shares of the Bank have been withdrawn with immediate effect," the bank quoted the RBI as saying in a notification to the stock exchanges on Friday.

Other Sensex gainers at the time of filing this report included Sun Pharma, HDFC and Cipla. The rally in pharma stocks is likely to sustain for a longer time, according to a brokerage.

"Given the underperformance in this space, investor interest seems to be coming back. Sun Pharma, Aurobindo, Lupin could continue to see interest apart from Cadila," Motilal Oswal Securities said.

Cadila Healthcare shares closed 19.94 percent higher at Rs 429 on the BSE on Thursday after the Zydus Cadila Group company informed the bourses that the US Food and Drug Administration (FDA) did not find any observation (under number 483) after inspecting its Moraiya facility from February 6 to 15, 2017.

In a related development, IOC and Indiabulls Housing will replace BHEL and Idea Cellular on the NSE Nifty. 

The Indian rupee opened at 67.12 to the US dollar on Friday.