However shareholding knowledge for the primary quarter means that whereas a broad-based return to Indian equities stays unsure, overseas buyers have gotten more and more selective in the place they put their cash.
Three bets, specifically, have paid off handsomely, serving to FIIs kick off FY27 on a robust observe. Knowledge from Prime Infobase exhibits that FII publicity to HFCL greater than doubled, with their stake rising to over 15% from 7% in This autumn. Over the identical interval, the inventory jumped a staggering 214%.
In Sterlite Tech, FII holding elevated by 6.75 share factors to 18.22%, whereas the inventory soared 248% in three months. In MTAR Tech, overseas buyers raised their holding by 7.49 share factors to 23.80%, and the inventory climbed a whopping 120% over the identical interval.
Overseas buyers’ rotation out of India’s large-cap bellwethers and into mid- and small-cap shares could have additional to run as international funds hunt for firms whose earnings can probably double or triple, in accordance with Rajat Rajgarhia, Managing Director and CEO–Institutional Equities at Motilal Oswal Financial Services.
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Greater than 80% of energetic international emerging-market funds are underweight India. If these funds merely restore their allocations to impartial, the shift may generate round $25 billion of inflows, HSBC strategists Prerna Garg, Herald van der Linde and Yogesh Aggarwal mentioned in a report.
HFCL’s highly effective surge
The sharp enhance in overseas possession comes as India’s knowledge centre business enters a multi-year development cycle, supported by accelerating digitalisation, rising cloud adoption and rising demand for synthetic intelligence infrastructure.
In line with worldwide brokerage Nomura, India’s knowledge centre IT load has expanded from round 350 MW in 2019 to almost 1.5-1.6 GW in 2025, translating right into a CAGR of about 29%, in contrast with roughly 20% globally.
HFCL has revised its FY27 income development estimate to 40%. Its board has additionally accredited an funding of Rs 215 crore to construct a producing facility for superior AI knowledge centre connectivity options.
The bull case for HFCL, nonetheless, extends past optical fibre and knowledge centres. Deven Choksey Analysis sees one other 53% upside potential, calling defence and aerospace the “X-factor” that modifications your complete funding thesis for the inventory. The brokerage initiated protection on HFCL with a ‘Purchase’ ranking and a goal worth of Rs 362 apiece earlier this week.
HFCL has consolidated its defence belongings below HFCL Advance Programs (HASPL), integrating aerostructure manufacturing, together with the acquired enterprise with greater than Rs 2,000 crore in export orders, radar or surveillance methods via Raddef, and thermal weapon sights right into a single scalable entity.
An ammunition manufacturing facility is being established in Andhra Pradesh for digital fuzes, multi-mode hand grenades, for which there are solely 3 licensees in India, and 155 mm artillery shells.
“We imagine defence income trajectory to be Rs 77 crore (FY26) to Rs 400 crore (FY27) to Rs 1,200 crore (FY28) to Rs 5,000 crore (FY29), at 25%+ EBITDA margins. Critically, defence prospects present advance funds, dramatically bettering working capital dynamics in comparison with the legacy EPC enterprise,” Deven Choksey mentioned.
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Causes behind Sterlite Tech’s rally
Final month, worldwide brokerage CLSA upgraded the inventory to Outperform and assigned a goal worth of Rs 950 implying an upside of 37% from present market ranges. The brokerage mentioned Sterlite Technologies‘ order guide surged 155% QoQ to Rs 18,600 crore, pointing to a robust development outlook.
Sterlite Applied sciences reported its strongest quarterly efficiency in Q1FY27, helped by increased demand for optical connectivity merchandise, development in its knowledge centre enterprise and a document order guide linked to AI-ready digital infrastructure.
The surge in overseas possession comes at a time when India’s knowledge centre business is getting into what could possibly be a multi-year growth part. Speedy digitalisation, rising cloud adoption and the rising infrastructure wants of synthetic intelligence are driving demand for knowledge centres and, in flip, optical fibre connectivity.
MTAR Tech’ bragging rights
The corporate has reiterated its FY27 steerage of 80% income development and EBITDA margins of 24% (±100bp). Administration targets 4-5x asset activate incremental capex (INR5b by FY28 and 70% for gas cell). The corporate is commissioning Gas Cell Part-2 growth by Sep-Oct’26 and a multi-fold Part-3 growth by Mar’27. Administration acknowledged that each one present orders might be executed in three years.
Motilal Oswal says the corporate has a robust order guide of Rs 51.4b as of Jun’26, pushed by a wholesome pipeline throughout the clear power (gas cells), A&D, nuclear sectors, and merchandise & others. Additional, commercialization of latest merchandise and onboarding of latest purchasers throughout all segments will drive additional development. We anticipate these initiatives to translate into robust development and margin growth, led by working leverage, as guided by the administration.
Additional, drastic enchancment in working capital to 59 days (vs. 172 in FY26, steerage for FY27 is 100 days) strengthens money flows and steadiness sheet high quality.
With robust order guide development throughout segments, ongoing fuel-cell capability growth, sturdy nuclear alternatives, anticipated doubling of aerospace income in FY27, and rising contribution from product options & knowledge centre infrastructure, we imagine MTAR is nicely positioned to realize development throughout all segments, says Motilal Oswal with a Purchase ranking and a goal worth of Rs 7,550 (10% upside) per share.
FIIs should be pulling billions out of Indian equities, however their bets are removed from disappearing. They’re merely changing into extra selective. HFCL, Sterlite Tech and MTAR Tech present the place that cash is discovering conviction, with sharp will increase in overseas possession coming alongside explosive inventory beneficial properties.
The larger query now could be whether or not that is the early stage of a broader rotation into India’s mid and smallcap winners, or just a handful of high-conviction bets in an in any other case cautious FII market.
(Disclaimer: Suggestions, solutions, views and opinions given by the specialists are their very own. These don’t signify the views of The Financial Instances)
