4 Penny Stocks Where FIIs Increased Their Stake in Q2

Foreign Institutional Investors (FIIs) are often called the smart money.

They move early, spot trends before they hit the mainstream, and rarely bet without conviction. So when FIIs quietly raise their stake in select Indian companies, it's worth paying attention.

In Q2 FIIs increased holdings across a handful of stocks-many of which are showing improving earnings visibility, cleaner balance sheets, and strong tailwinds from India's growth cycle.

Following where the smart money flows can sometimes reveal early opportunities the broader market hasn't fully priced in yet.Here are 4 such penny stocks.

Take a look...

#1 PC Jeweller

PC Jeweller operates as a prominent Indian jewellery company within the organized retail sector. The company is engaged in the trade, manufacture, and sale of gold, diamond, precious stone, gold and diamond studded jewellery, and silver articles.

As of March 2025, it maintained a network of 52 showrooms, including 3 franchisee showrooms, spread across 38 cities in India.

It caters primarily to retail customers through both online and offline channels, offering a wide variety of traditional and contemporary designs.

From June to September 2025 quarter, foreign institutional investors (FIIs) boosted their stake in the company by 1.5%, from 4.92% to 6.46%.

The increase in foreign holdings coincides with major developments aimed at resolving the company's financial and legal challenges, leading to a massive operational turnaround in FY25.

PC Jeweller has successfully concluded the formalisation of its One Time Settlement proposal with its Consortium Lenders (14 banks) by executing a Joint Settlement Agreement on 30 September 2024. This settlement involved both cash and equity components for discharging outstanding debts.

As a result, the company was able to reduce its outstanding debts owed to banks by approximately 50% in FY25. With further repayments anticipated, the company is confident about becoming debt-free by the end of FY26.

The company has also successfully raised funds by issuing Fully Convertible Warrants through a preferential issue. Rs 11.7 billion (bn) was raised via the conversion of these warrants into equity, earmarking funds for debt repayment, working capital, and general corporate purposes.

With the amicable conclusion of litigation regarding its lenders, PC Jeweller is focused on re-establishing its market presence.

Leveraging its core strengths in manufacturing, design capabilities, and established network of showrooms, the company aims to regain market share, and achieve higher business levels in the coming years.

The Indian jewellery sector, supported by favourable demographics and increasing urbanization, is expected to continue its growth trajectory, driven by product innovation and mandatory hallmarking.

For more details, check out PC Jeweller's financial factsheet.

#2 Jayaswal Neco Industries

Jayaswal Neco Industries is a Chhattisgarh-based integrated steel and mining company operating in the alloy steel and castings industry. The company has a legacy spanning over five decades.

It operates a fully integrated 1 MTPA (million tonnes per annum) alloy steel plant. Operations are structurally robust due to the fact that the company meets 100% of its iron ore requirement from its two captive iron ore mines.

It also operates 54.5 MW captive power plants. It serves industries like automotive, engineering, railways, infrastructure, power, oil and gas, and defence.

From June to September 2025 quarter, FIIs boosted their stake in the company by 1.03%, from 0.04% to 1.07%.

FIIs have been drawn to Jayaswal Neco Industries due to its turnaround, resource-backed operating model, and significant efforts toward deleveraging.

The company successfully refinanced its outstanding debt after exiting the restructuring process using Non-Convertible Debentures (NCDs) in December 2023.

Subsequently, in August 2025, it secured a sanction of Rs 23 bn secured NCD/term loan from Tata Capital to refinance its existing high-cost NCDs, reducing the interest rate from 17.5% per annum to 12.5% per annum.

This massive refinancing effort reduces the company's risk profile and is expected to cut finance costs by December 2025. The outstanding net debt reduced to Rs 24.8 bn at the end of June 2025 (from Rs 31.8 bn at the end of March 2024), reflecting a higher-than-expected debt repayment.

Jayaswal Neco Industries ownership of two iron ore mines (Metabodeli and Chhotedongar), providing 100% self-sufficiency in iron ore, insulates the company against input cost volatility and provides a competitive advantage sought by FIIs. These mine licenses are valid until 2052 (Metabodeli) and 2055 (Chotedongar).

The company completed capital repairs and upgrades to its blast furnace in FY25, strengthening the operational backbone for sustained productivity.

This upgrade targeted improvements in output and efficiency. The integrated operations, running from mining to downstream steel, yield cost efficiencies.

Operational profits are showing strong recovery, with the Q2FY26 operating margin reaching 18%, up from 14% in Q1FY25.

The company is expected to sustain high operating margins over the medium term, supported by the usage of captive iron ore mines and ongoing cost management efforts.

For more details, check out Jayaswal Neco Industries' financial factsheet.

#3 Rico Auto Industries

Rico Auto Industries is a leading Indian auto components manufacturer and global supplier, providing high-precision components and assemblies for the automotive industry.

The group manufactures machined engine and die-casting, and clutch parts. Its product portfolio is diversified, supporting Internal Combustion Engines (ICEs), Hybrid Vehicles, and Electric Vehicles (EVs).

It operates 16 manufacturing plants across India and maintains a global presence in four continents, supported by warehousing facilities in the US and Europe.

The group is also strategically expanding into non-automotive verticals like railways and defence containerised shooting ranges.

From June to September 2025 quarter, foreign institutional investors (FIIs) boosted their stake in the company by 1.68%, from 1.35% to 3.03%.

Rico Auto has an order book exceeding Rs 10 bn on an annualised basis. This includes new orders of Rs 7.2 bn in peak annual sales from major customers like Maruti, TATA, Toyota, Musashi, Knorr Bremse, AISIN, and GKN.

FIIs favoured the stock amid a broader rally in auto ancillaries. The company demonstrated growth in the 2-wheeler segment (4.4% YoY in Q1FY26), counteracting a market de-growth.

The management is focused on expanding into higher-margin businesses like exports, commercial vehicles, defence (shooting ranges), and railways.

The company expects turnover of around Rs 26.5bn (up 20%) in FY26, leveraging improved capacity utilisation and new domestic/export orders.

Management is targeting operating margins of 12-13% in the medium term, driven by new, higher-margin products and cost reduction efforts.

For more information, check out Rico Auto Industries' financial factsheet.

#4 OnMobile Global

OnMobile Global is a global provider of mobile entertainment and gaming solutions, operating within the telecom value-added services industry.

The company's core offerings include mobile entertainment platforms like Ringback Tones (RBT), Videos & Infotainment, and advanced mobile gaming solutions such as Challenges Arena (CA) and ONMO.

It also offers enterprise communication services under the brand Buzzmo and a SaaS gamification platform called Gamize. The group has an established market position, operating in over 69 countries and servicing 125 customers.

From June to September 2025 quarter, FIIs boosted their stake in the company by 1.62%, from 0.24% to 1.86%.

The FII interest was due to impressive financial growth, especially within the gaming segment.

The subscriber base crossed the 12 m mark in Q1FY26, achieving 58% year-on-year (YoY) growth. Gaming subscription revenue demonstrated a 25.2% YoY increase.

The core financial target for the gaming subscription business is to reach a run rate of US$ 2 million per month by the end of FY26 end, about 50% YoY growth on a normalised subscription basis.

OnMobile Global secured a major strategic win in its traditional mobile entertainment business which rebounded 13% quarter-on-quarter in Q1FY26, by signing the first big contract for Buzzmo.

Buzzmo, the Enterprise Connect service, is viewed as a global product, and this initial agreement is a 5-year deal with a Middle East operator for enterprise communication. The company also achieved a win for its core gaming platform.

Management plans to convert dormant assets into cash, particularly targeting the sale of its investment in Chingari, which is valued at roughly Rs 600 m on the books.

Operational efficiency initiatives included reducing the headcount from 449 in FY24 to 350 in FY25 and optimising marketing spending, resulting in a 7.8% reduction in operating expenses in FY25.

In Q1FY26, marketing costs grew only 5% while gaming revenues grew 25%. The global gaming market is anticipated to reach approximately US$ 400 bn by 2029, presenting immense opportunity for the group.

The company specifically targets a 25% operating margin on its gaming business within the coming 12 to 18 months.

For more information, check out OnMobile Global's financial factsheet.

Conclusion

When the smart money starts moving, it often leaves subtle clues before the larger market catches on.

The rising FII stakes in these four penny stocks suggest growing institutional conviction in India's mid and small-cap space, especially where balance sheets are improving and business models are turning leaner and more focused.

Still, not every stock with foreign buying becomes a multibagger. The real takeaway here is to use FII activity as a starting point, not a shortcut.

Pair that insight with your own research on fundamentals, growth drivers, and management execution to separate real turnarounds from temporary momentum plays.

In short, follow the smart money, but always verify the thesis yourself.

Happy investing.