HFCL shares have seen a significant decline, dropping nearly 5% in intraday trading to ₹177.87, resulting in a total loss of about 10% over two consecutive sessions. This decline follows an impressive 165% rally throughout 2026, primarily driven by increased demand for optical fibres and substantial defence orders. Despite the recent pullback, HFCL has shown strong operational performance, with revenues nearly doubling year-on-year to ₹1,824 crore and a net profit of ₹184 crore, indicating a robust turnaround from previous losses. The company's evolving business model is highlighted by a shift in product revenue, which has increased significantly, and a recent order worth ₹135.09 crore from RailTel Corporation for a defence-related project. However, valuation concerns have emerged as HFCL's price-to-earnings ratio is around 91.93, which is considerably higher than its peers, and technical indicators suggest the stock may be overbought, indicating potential for a short-term consolidation.