Why FIIs Are Buying Stake in These 5 Stocks: Are Fundamentals Improving?

Foreign institutional investors have sharply increased their holdings in a few Indian stocks during the June 2026 quarter. HFCL, Lenskart Solutions, Sterlite Technologies, ideaForge Technology and MTAR Technologies all saw foreign ownership rise by more than 7 percentage points between March and June, according to shareholding data.

At first glance, that looks like a strong signal. But following FII buying blindly can be misleading.

Foreign ownership can rise because investors bought shares in the market, participated in a QIP, acquired shares from an existing shareholder or because the company's shareholding structure changed. More importantly, even genuine institutional buying does not automatically mean that the underlying business has improved.

So instead of asking only where FIIs are buying, the more useful question for investors is: Are revenue, profitability, margins, order books and balance sheets improving at the same time?

Here is what the numbers show.

HFCL: Is FII Buying Being Backed by a Real Earnings Turnaround?

HFCL saw one of the biggest increases in foreign ownership, with FII holding rising by about 8.66 percentage points during the June quarter.

The financial performance has improved just as sharply.

Revenue from operations jumped about 120% year-on-year to ₹1,915 crore in Q1 FY27 from ₹871 crore a year earlier. More importantly, the company moved from a ₹29 crore loss in Q1 FY26 to a profit of about ₹246 crore. EBITDA reached roughly ₹445 crore, translating into an EBITDA margin of more than 23%.

That means this is not simply a case of investors betting on a future recovery. A large part of the recovery has already started appearing in the financial statements.

The order book strengthens that argument. HFCL had an order book of roughly ₹26,665 crore, supported by telecom infrastructure, optical fibre, defence and newer data-centre connectivity opportunities. It also secured a ₹2,666 crore contract from Rail Vikas Nigam during June and followed it with export orders for optical fibre and data-centre connectivity solutions.

But one strong quarter should not automatically be extrapolated indefinitely. HFCL operates in businesses where project execution, telecom capex cycles and product mix can cause large quarterly swings. The next test is whether the company can maintain these margins while converting its large order book into cash-generating revenue.

Sterlite Technologies: A Turnaround Built Around AI and Data-Centre Infrastructure?

Sterlite Technologies offers an even more dramatic turnaround story.

Foreign holding increased by about 8.24 percentage points between March and June. During the same period, the company's operating performance improved considerably.

Q1 FY27 revenue rose 87% year-on-year to ₹1,910 crore, while EBITDA increased 184% to ₹397 crore. PAT reached ₹197 crore compared with just ₹10 crore a year earlier. EBITDA margin expanded to 20.8%, its highest level in nearly 20 quarters.

The order book is equally important.

STL ended the quarter with a record ₹18,618 crore order book. This included a multi-year contract worth more than ₹10,000 crore for optical connectivity products used in next-generation AI data centres, alongside other hyperscaler orders.

This changes the nature of the STL story. Historically, investors had to worry about weak profitability and leverage alongside cyclicality in optical fibre. Now, the business is benefiting from a new demand cycle centred on data centres and AI infrastructure while its financial position is improving.

The remaining risk is execution. An order exceeding ₹10,000 crore is significant relative to STL's existing revenue base, but an order book only becomes valuable when it converts into revenue, margins and cash flow.

STL has moved beyond a simple recovery narrative. Revenue, EBITDA, margins, order book and balance-sheet quality are improving together. However, investors now need to track how efficiently the huge order pipeline gets executed.

MTAR Technologies: FIIs Are Buying Into an Order Book That Has Almost Doubled

MTAR Technologies saw its FII holding increase from around 17.3% to nearly 24.8% during the June quarter, an increase of roughly 7.5 percentage points.

Here again, the fundamentals provide meaningful support.

Consolidated revenue from operations increased about 130% year-on-year to ₹360.7 crore in Q1 FY27 from ₹156.6 crore. Net profit increased from roughly ₹10.8 crore to ₹50.2 crore over the same period.

But the bigger number is MTAR's order book.

The company recorded approximately ₹2,895 crore of order inflows during Q1 FY27, taking its closing order book to around ₹5,143 crore as of June 30. That compares with an order book of roughly ₹2,592 crore at the end of March.

In other words, MTAR's order book almost doubled in a single quarter.

That matters because MTAR operates in specialised areas including civil nuclear, clean energy, aerospace and defence. Its customers include organisations such as NPCIL, ISRO, DRDO and HAL, alongside overseas companies.

The opportunity is therefore not simply higher quarterly sales. A much larger order book can provide several years of revenue visibility if execution remains strong.

The challenge is valuation. The data places MTAR at a P/E of more than 160 times earnings. Such a valuation means investors are not merely paying for today's profits. They are already pricing in substantial growth from the order book, nuclear opportunities, aerospace and other businesses.

MTAR is among the clearest cases where FII accumulation and fundamental improvement are moving together. But at a high valuation, execution has to remain equally strong for the earnings story to catch up with expectations.

ideaForge: Foreign Investors Are Buying, But Has the Turnaround Fully Arrived?

ideaForge is the most interesting counterexample in this list. FII holding increased by about 7.54 percentage points during the June quarter, but its fundamentals require more careful interpretation.

Revenue from operations jumped to ₹68.6 crore in Q1 FY27 from just ₹12.8 crore a year earlier. EBITDA improved from a loss of ₹15.1 crore to a positive ₹4.3 crore. The company's net loss also narrowed sharply from ₹23.6 crore to approximately ₹2.6 crore.

On the surface, growth of more than 400% looks extraordinary.

But the base was extremely weak.

Sequentially, revenue actually fell by roughly half from Q4 FY26, when ideaForge generated about ₹141 crore in revenue. The drone business can be particularly lumpy because large defence orders and deliveries do not occur evenly across quarters.

The company had an order book of around ₹256.8 crore at the end of June and said it had already executed more than 20% of its opening FY27 order book during Q1. Management is targeting execution of the remaining opening order book by Q3.

There is another important difference here. ideaForge completed a ₹500 crore QIP involving domestic and global institutional investors during the period. Therefore, investors should not automatically interpret the entire increase in FII percentage as foreigners independently accumulating shares through the secondary market.

This is exactly why shareholding data needs context.

ideaForge's business is clearly recovering from the extremely weak base of FY26. Revenue and EBITDA have improved substantially, but consistent profitability has not yet been established. Here, institutional interest appears to be running somewhat ahead of complete earnings confirmation.

Lenskart: Fundamentals Are Improving, But Is Growth Already Expensive?

Lenskart is very different from the other four companies.

HFCL and STL are infrastructure turnaround stories. MTAR and ideaForge are tied to strategic manufacturing and defence. Lenskart is primarily a consumer growth story.

Yet the fundamental improvement is equally visible.

According to Lenskart's Q1 FY27 investor disclosures, revenue stood at about ₹2,714 crore, up roughly 33.6% year-on-year. Profit after tax was around ₹228 crore, up about 182%.

Profitability also improved meaningfully. Adjusted EBITDA reached about ₹588 crore, while adjusted EBITDA margin stood at around 21.7%, compared with 17.7% in the corresponding period.

However, there is an important ownership nuance here too. SoftBank sold a sizeable portion of its Lenskart holding during June, with shares absorbed by a mix of institutional investors. Therefore, part of the change in the ownership structure came through an existing shareholder exiting rather than simply fresh buying in the open market.

And then comes valuation. Lenskart trades at a P/E of roughly 183 times. At that level, investors are already paying for significant future earnings growth.

So Lenskart demonstrates an important lesson: improving fundamentals and an attractive valuation are two different questions.

Revenue, profits and margins are all moving in the right direction. The fundamental improvement is real. But because expectations embedded in the valuation are already high, future growth needs to remain strong for the earnings to justify the valuation.

What Does FII Buying Actually Tell Investors?

There is clearly something interesting happening across these five stocks.

HFCL, STL, MTAR and Lenskart have all reported substantial revenue and profit improvement alongside higher foreign ownership. ideaForge has also improved considerably, although it has yet to establish consistent profitability.

But the larger lesson is that FII buying should be treated as a starting point for research, not as an investment thesis by itself.

An FII holding increase can happen because foreign investors purchased shares in the market. But it can also occur because they subscribed to a QIP or bought a large block from an existing investor. The percentage itself does not explain why ownership changed.

More importantly, even sophisticated institutional investors can get their assumptions wrong.

That is why the financial numbers matter more.

In HFCL and STL, the important signal is not just higher FII ownership but improving margins and large order books. For MTAR, it is the combination of higher earnings and a rapidly expanding order pipeline. For Lenskart, it is improving operating leverage. For ideaForge, the numbers suggest recovery, but profitability still needs further confirmation.

What Should Investors Track Next?

• Earnings sustainability: HFCL and STL have delivered exceptional Q1 growth. Investors should see whether revenue and margins remain strong over multiple quarters rather than extrapolating one unusually strong period.
• Order execution: MTAR, STL, HFCL and ideaForge all depend heavily on converting their order pipelines into actual revenue. Order wins are useful, but execution ultimately determines profits and cash flow.
• Cash generation: Rapid growth can consume working capital. Investors should track whether higher reported profits are also translating into stronger operating cash flow.
• September-quarter FII ownership: The June quarter tells us where foreign ownership increased, but the next shareholding disclosure will show whether investors continued adding after the sharp improvement in stock prices and earnings.
• Valuation versus earnings: Several stocks in this list trade at very high earnings multiples. Even excellent businesses can struggle to generate attractive returns if earnings fail to grow quickly enough to support expectations.

Author's Take

There is genuine fundamental improvement behind much of the FII accumulation in these five stocks, but the quality of that improvement is not identical.

HFCL and Sterlite Technologies are showing sharp operational turnarounds supported by stronger margins and sizeable order books. MTAR combines strong quarterly earnings with one of the biggest improvements in revenue visibility. Lenskart is delivering strong consumer growth while improving profitability, although its valuation leaves little room for a major slowdown.

ideaForge sits at a different stage. The recovery is visible, but consistent profitability still needs to be demonstrated.

That distinction is important. The interesting signal is not simply that FIIs increased their stakes. It is when FII ownership, revenue growth, profit improvement, margins and business visibility begin improving at the same time.

FII data can tell investors where institutional money is moving. Fundamentals tell them whether the business is moving in the same direction.