According to the data available with stock exchanges, the holding of foreign institutional investors (FIIs) increased in all the three listed aviation firms during the quarter.
"Aviation stocks are now turning around. SpiceJet and Jet Airways are back in black. Also hopes of foreign investment in the sector are driving FIIs to increase their exposure in these stocks," CNI Research CMD Kishore Ostwal said.
The FII holding in Jet Airways rose from 6.70 per cent to 7.12 per cent at the end of April-June quarter.
During the same period, the FII shareholding in SpiceJet moved up from 2.61 per cent to 3.59 per cent.
Besides, FIIs stake in Kingfisher Airlines rose from 0.34 per cent to 0.98 per cent in the period under review.
Higher yields has led to Jet Airways and Spicejet posting profits in the quarter ended June.
After hovering in losses for five consecutive quarters, budget carrier Spicejet reported a net profit of Rs 56 crore for the April-June period on the back of significant growth in sales and better yields.
Similarly, after being in red for five quarters in a row, Jet Airways Group flew back into the positive terrain with a net income of Rs 36.4 crore in the June quarter on the back of higher yields and cost management.
"FIIs have been betting on aviation stocks amid expectations of FDI. Besides, good sales volume growth have also helped the stocks. Also, most of the negative news (weak rupee and high fuel cost) have been factored in," Geojit BNP Paribas Research Head Alex Matthews said.
Shares of Jet Airways have gained 7.8 per cent since April 2 to July 31 this year, while Spicejet soared 32.85 per cent.
Kingfisher Airlines, however, slumped 37.74 per cent during the same period.
Foreign airlines are not allowed to invest in Indian airlines, though foreign direct investment of up to 49 per cent by FIIs and other investors, not connected with aviation business, is allowed.
The government, however, is looking at allowing foreign airlines to invest up to 49 per cent in domestic carriers to give a boost to the industry.