Penny stocks are often ignored by big institutions and are generally retailers’ favourites.
But when domestic institutional investors (DIIs) and foreign institutional investors (FIIs) start buying into this space, it usually means something has changed for these stocks.
While retail investors chase momentum, institutional money often looks for early signs of a turnaround, improving fundamentals, or mispriced risk. And occasionally, that search leads them to stocks trading in the “penny” zone.
So which low-priced names have caught the attention of big money recently, and more importantly, why?
In this editorial, we present 3 penny stocks where DIIs and FIIs increased their stakes compared to the previous quarters.
#1 Motherson Sumi Wiring India
First on the list is Motherson Sumi Wiring India (MSWIL). It manufactures wiring harnesses, the complex bundles of wires, connectors, and terminals that transmit power and data throughout a vehicle.
It isn’t just a manufacturing shop; they provide full-system solutions to Original Equipment Manufacturers (OEMs). This means they are involved right from the design stage to the final assembly.
The company was formed in 2022 by demerging the domestic wiring harness business from Samvardhana Motherson International.
Regarding its financial performance, the company achieved a 18% compounded annual growth rate (CAGR) in revenue growth over 3 years, along with a net profit CAGR of 10%.
The last 3-year average return on equity (ROE) has been 39%.
The DIIs’ shareholding in the December 2025 quarter rose to 17.17% compared to 16.59% in the September 2025 quarter.
Motherson Sumi Wiring India Stock Price – 1 Year
Data Source: Ace Equity
In 2Q FY26, the passenger vehicle industry grew production volumes by just 4% year-on-year (YoY). In contrast, MSWIL grew its revenue by 19%. When a company outperforms its underlying industry by that wide a margin, investors pay attention.
Cars are becoming increasingly sophisticated, featuring sunroofs, 360-degree cameras, and advanced infotainment systems. All those features require complex wiring.
This shift towards SUVs and feature-rich vehicles means the “content per vehicle” is going up. MSWIL makes more money on a premium SUV than a budget hatchback, and the market is shifting decidedly towards premium.
There is often a fear that EVs will disrupt traditional auto suppliers. MSWIL has turned that into an opportunity. Their wiring harnesses are needed whether a car runs on petrol, diesel, or batteries.
In fact, their EV revenue share has climbed to 6.7% in 2Q FY26. They are already supplying to most new EV programs in India, proving they are future-proof.
These could be a few of the reasons that might have piqued institutional interest.
Looking ahead, the immediate focus is on stabilising and ramping up the three new greenfield plants. One of these plants has already hit its stride, while the other two are in the ramp-up phase. As these plants increase capacity utilisation to optimal levels (70-80%), profitability will rise.
For the current year, the company has budgeted a capital expenditure of approximately Rs 2.1 bn to fuel this expansion.
#2 NBCC (India)
Next on our list is NBCC (India), a specialised project management arm for the Government of India. As a Navratna CPSE under the Ministry of Housing and Urban Affairs, it operates primarily in three segments:
Project Management Consultancy (PMC): This is their bread and butter, contributing nearly 90% of their business. Instead of just building things themselves, they manage massive projects for government bodies, taking a fee for their expertise.
Redevelopment: They take old, dilapidated government colonies or PSU lands, redevelop them into modern complexes, and sell a portion of the commercial space to fund the entire construction. The government gets free infrastructure, and NBCC makes a margin.
EPC & Real Estate: They also handle Engineering, Procurement, and Construction contracts and have a growing real estate arm.
Talking about its recent financial performance, the company has delivered a top-line growth of 16% CAGR over a 3-year period and a net profit CAGR of 30%.
The last 3-year average ROE has been 24%.
The DII shareholding in the December 2025 quarter rose to 12.25% compared to just 10.97% in the September 2025 quarter.
NBCC (India) Stock Price – 1 Year
Data Source: Ace Equity
Institutional investors usually follow the money, and right now, NBCC’s books show a lot of it. The sheer volume of work in the pipeline is hard to ignore. NBCC is sitting on a consolidated order book of over Rs 1.28 trillion.
To put that in perspective, their annual revenue target for this year is around Rs 150 bn. This gives investors high visibility on revenue for the next 4 to 5 years.
In a capital-intensive sector like infrastructure, NBCC stands out because it operates with zero debt. It executes projects using a self-sustaining model or client funds, meaning they don’t have the heavy interest burdens that crush other construction firms.
NBCC has carved out a niche as the go-to agency for fixing messes. It successfully took over the stalled Amrapali housing projects under Supreme Court orders.
This success has positioned them as the primary candidate for other stalled mega-projects, like Supertech, which creates a new, high-margin revenue stream that private players can’t easily touch.
Looking ahead, the revenue guidance is of Rs 140-150 bn for FY26. But the kicker is in the long-term expected jump to Rs 180 bn in FY27 and Rs 250 bn by FY28.
While current EBITDA margins are hovering around 4-5%, management expects this to stabilise between 6-6.5% for the full year.
They anticipate a significant boost in profitability in the coming years (targeting double-digit EBITDA) once high-margin real estate inventory from projects like Ghitorni and the 37D project in Gurgaon starts hitting the books in FY27-28.
#3 Dolat Algotech
Next is Dolat Algotech, a stockbroker but not a traditional one. They don’t chase retail clients to open demat accounts, nor do they tell you which stocks to buy.
Dolat is a proprietary trading firm. This means they trade their own capital, not client money, using high-speed, automated algorithms.
The company executes arbitrage and hedging strategies to capture price discrepancies across different assets (like futures vs options) at fast speeds.
Coming to its financial performance, the company has delivered a top-line growth of 18% CAGR over a 3-year period and a net profit CAGR of 9%.
The last 3-year average ROE has been 22%.
The FIIs’ shareholding in the December 2025 quarter rose to 0.73% compared to 0.25% in the September 2025 quarter.
Dolat Algotech Stock Price – 1 Year
Data Source: Ace Equity
If big institutional investors are increasing their stake, they usually see a disconnect between the stock price and the company’s earning power.
Dolat thrives on volatility. When the market goes crazy, spreads widen, and arbitrage opportunities multiply. The Indian market has seen an explosion in retail participation and trading volumes, particularly in the Futures and Options (F&O) segment.
Higher volume equals more liquidity, which directly feeds Dolat’s profitability. Investors are essentially buying a proxy for the growth of Indian derivative trading volumes.
Looking ahead, the company management believes the Indian structural growth story is intact. They expect India to remain the fastest-growing major economy, driven by favourable demographics and government stability.
They are specifically looking at the introduction of new indices like FINNIFTY and MIDCPNIFTY as the next leg of volume growth, similar to how Bank Nifty grew over the last decade.
There is a regulatory elephant in the room. SEBI changed rules to limit weekly index derivative products to just one per exchange. This directly hits High-Frequency Trading (HFT) volumes.
The company is shifting focus toward delta-neutral hedged strategies, which are less sensitive to weekly expiry constraints.
While short-term derivative volumes might dip due to higher taxes (STT) and new rules, management is betting that their size, scale, and ability to adapt their algorithms will allow them to sustain their position.
Conclusion
DIIs and FIIs aren’t buying these stocks because they are cheap in absolute terms. They’re buying because they see earnings visibility, structural tailwinds, and balance-sheet comfort that the market hasn’t fully priced in yet.
That said, institutional buying is a signal, not a guarantee. Penny stocks are always a risky investment, and narratives change quickly if execution slips or regulations shift.
Use this editorial as a starting point, not the finish line. Track quarterly numbers, watch ownership trends, and be honest about your risk appetite.
It’s always important to conduct thorough research on financials and corporate governance before making investment decisions, ensuring they align with your financial goals and risk tolerance.
Happy investing.
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