Shares in housing finance companies gain after market regulator Securities and Exchange Board of India (SEBI) says will allow debt-oriented mutual funds to invest up to 10% of their net assets in companies in the sector.
Previously housing finance companies had been included as part of SEBI's broader 30% cap on debt investments in the financial sector.
As a result, funds had typically preferred to invest in bigger financial companies, such as lenders and insurers.
Giving housing finance companies their own cap on investments should steer money into the sector and lower funding costs, analysts say.
HDFC Ltd gains 0.6%, LIC Housing Finance rises 1.5%, while Dewan Housing Finance also gains 2.4%.
