The "Stereo" light indicates the presence of a FM Multiplex signal at the tuner.
Not familiar with that particular unit, but unless there is a switch that selects "Stereo, Mono, Left or Right", the unit is always operating in "Stereo" mode when using the phono, auxiliary or tape inputs.
There may be a switch to select "FM Auto or FM Stereo, or FM only". There may also be a pushbutton switch for "Mono / Stereo" which is effective for FM Stereo broadcasts only. Sometimes when the signal is weak, the noise in a Stereo signal is too much and can be reduced by switching to "mono".