Stocks soared and bankers cheered, as the UPA government got a new lease on life, minus the reform-resistant Left parties.

The BSE banking sector gained nearly 10 per cent, hoping that long buried reforms will finally see the light of the day and India's largest private sector bank, ICICI Bank, could be the biggest beneficiary.

Sources tell NDTV that ICICI's insurance partner Prudential is keen on increasing its stake in the JV, if the government can push through insurance reforms allowing foreign players to raise their stake to 49% from 26%. The two partners are also eagerly eyeing the pension business, provided reforms are on track.

While ICICI may gain the most, other players are also watching the government to see if the 10% voting cap on shareholders' be revoked, which will mean foreign and private shareholders will be a lot more willing to pump in more capital.

Pension reforms could also mean that private sector players will have a shot at setting up and managing private pension funds, giving them access to long-term savings.

But the biggest impact will be the raising of FDI cap to 49%, allowing Indian banks to raise much needed capital for their insurance joint ventures.

“The most significant impact will be on insurance, if the cap is lifted,” said Ravi Trivedi, Executive Director - Banking & Finances, KPMG.

For financial giants like ICICI and HDFC, the change in the reforms environment could not have come at a better time. Recent days have seen investors turn skeptical about the Indian banking story, due to rising interest rates and dipping credit growth. But with the government shaking the dust off a whole set of crucial financial sector reforms, the sector could get a significant boost and once again grab the attention of global investors.