The problem is probably that you need to look at the time parts only: a DateTime has both date and time, so if your timestamps are literally that then they probably include a date element. But that code looks rather odd anyway...
What you probably want to do is along the lines of
UPDATE MASTERPROCESSDAILYDATA SET Status =
CASE WHEN CAST(PDate AS TIME)
BETWEEN CAST ('08:00' AS TIME)
AND CAST('09:30' AS TIME)
THEN 'P'
ELSE 'HL'
END
[edit]Wrong column name[/edit]