The HDFC Bank stock rose up to 9 percent in Friday's trade, hitting a new 52-week high of Rs 1,450 on the BSE.
On Thursday, the Reserve bank of India removed restrictions imposed on foreign investors for buying stock of the private lender.
The aggregate foreign shareholding through ADR/GDR/FIIs/FPIs/FDI/NRIs/PIOs in HDFC Bank Ltd. have gone below the prescribed limit stipulated under the extant FDI Policy, RBI said in a notification.
"Hence the restrictions placed on the purchase of shares of the above company are withdrawn with immediate effect," RBI said.
The bank pipped Reliance Industries in terms of market capitalisation on Friday to become the second-most valued firm behind market leader Tata Consultancy Services after the cap on buying for foreign investors was lifted.
However, towards the fag end of trading, excessive buying into the stock triggered the upper limit of 74 percent for the bank's overall paid up capital. Hence, the RBI said no further purchases of the bank would be allowed through stock exchanges in India on behalf of Flls, FPIs, NRIs, PIOs.
The HDFC Bank stock pared its gains and closed 3.75 percent or 50 points higher at Rs 1,377 on the BSE.
It beat RIL in term of market capitalisation when the market closed. HDFC Bank reached market capitalisation of Rs 3.54 lakh crore against RIL's Rs 3.49 lakh crore m-cap. Both still lag market leader Tata Consultancy Services which has a market capitalisation of Rs 4.74 lakh crore.
HDFC Bank was also the topper in terms of volume of shares traded reaching 5,524,506. The value of Friday's trade rose to Rs 78.21 crore, the maximum on the BSE.