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Best IT Stocks in India 2023: Should You Invest?

Created on 03 Oct 2022

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Updated on 03 Dec 2022

Best IT Stocks in India 2023 - Insider by Finology

You have worked hard to save your money. Now, you want to make your money work for you by investing in a solid, long-term investment. But where should you invest your money?

If stability and growth potential is what you are looking for, investing in the top IT stocks in India is a smart move. The Indian IT sector is one of the fastest-growing in the world and is expected to grow rapidly in the coming years.

Presently accounting for roughly 7.7% of GDP, the IT sector is projected to grow to nearly 10% by 2025. Companies in the IT sector are leaders in cutting-edge technology and are well-positioned to capitalise on the growing global demand for IT services.

So, if you’re looking for a safe and profitable place to invest your money, you have come to the right place. Now, read on to find out more about the top IT stocks in India and start investing.

The Indian IT Industry

The Indian IT industry is growing at an astonishing rate. In the last decade, the sector has grown from a niche player in the global market to a leading provider of IT services.

Today, India is home to some of the world’s largest and most successful IT companies, such as Tata Consultancy Services (TCS), Infosys, and Wipro. The IT sector is projected to grow at a compound annual growth rate (CAGR) of 7.5% between 2019 and 2024, according to a report by India Brand Equity Foundation (IBEF). 

The IT sector has benefited from several factors, including a large pool of skilled workers, competitive costs, and growing demand for IT services from domestic and international customers. As a result of this rapid growth, the sector is now one of the largest and most important industries in India, contributing significantly to the country’s economy.

The Indian government has been keen to support the sector’s growth and has formulated policies to attract more investment. The government has introduced several policies and initiatives to promote the development of the IT industry.

These include the enactment of the Digital India Program, which aims to encourage the spread of digital literacy and usage of digital services, and the Make in India Program, which aims to promote the manufacturing sector in India. These initiatives have helped to create a happening environment for the growth of the IT sector in India.

As a result, the IT industry has witnessed strong growth in recent years, giving you plenty of reasons to be bullish on the prospects for the best IT stocks in India. Just to put things in perspective, here is a price comparison of the major IT stocks-

Price Comparison between TCS, Infosys, Wipro, HCL -  Insider by Finology

Top IT Stocks to Look for in India

Given the positive outlook for the sector, several top IT stocks in India are worth watching in India. But, here is a disclaimer though, a crisp list of top stocks ain't worth a penny if you don't do your own research. We suggest you check each of the below-mentioned stocks in the best screener for fundamental analysis, Ticker by Finology and choose what suits YOUR investing appetite.

Here are just a few of the companies that could be poised for strong growth in the coming years:

1. Tata Consultancy Services Ltd. (TCS)
Tata Consultancy Services Ltd. (TCS) - Insider by Finology

TCS is one of the largest and most successful IT companies in India. The company offers a wide range of IT services, such as consulting, software development, and business process outsourcing. TCS has over 400,000 employees and operates in over 150 countries worldwide. 

Among the top IT stocks in India, the company has been growing rapidly in recent years. It is well-positioned to capitalise on trends such as digital transformation and cloud computing. The company's track record is reflected in its financials, and it’s one of the best IT stocks in India. 

It has consistently generated industry-leading results over the past five years, including a 5-year average Return on Equity (ROE) of 37.2%, an operating profit margin of 27.67%, and free cash flow of approximately ₹36,985 crores for 2022. 

A major threat to the firm is the possibility that it would be unable to sustain the same level of growth it has in the past. It would reduce the premium valuations the stock currently enjoys and harm the share price. The IT Penny Stocks price has already felt this effect, although analysts anticipate it will be temporary.

2. Infosys Private Ltd. 
Infosys Private Ltd. - Insider by Finology

Infosys is India's second-largest supplier of IT services, which caters to customers in the USA, Europe, Asia, and more by offering an extensive set of IT services. 

The company has shown solid financial success among the best IT stocks in India over the last several years, with an average ROE of 25.8% over the past five years and an operating profit margin of 25.7%. 

The company provides similar services to TCS but has also embarked on an ambitious plan to transform itself into a “digital transformation leader”. This transformation includes investing heavily in new technology capabilities like artificial intelligence and big data.

As part of this plan, Infosys has also undertaken major organisational changes, such as spinning off its non-core business assets into a separate entity. These changes have been well received by investors and should help Infosys to accelerate its growth going forward.

3. Wipro Ltd.

Wipro Ltd. - Insider by Finology

Wipro is another leading Indian IT company with over 150,000 employees. The company provides similar services to TCS and Infosys but has also developed a strong focus on sustainability.

As a result, Wipro was one of the first companies in India to receive global recognition for its sustainability initiatives and has continued to invest heavily in this area. These investments have helped Wipro differentiate itself from its competitors and should help it win new business.

As for the numbers, the average 5-year ROE is 19.8%, with the operating profit margin at 16.69%.

4. HCL Technologies Ltd. 

HCL Technologies Ltd. - Insider by Finology

HCL Technologies is India’s fourth-largest IT company, with a market capitalisation of ₹1 lac crore. The company has seen strong growth in recent years, driven by its focus on digital transformation initiatives for its clients.

It is the fourth-largest Indian IT company by revenue and has a strong track record of growth. HCL Technologies' share price has also outperformed the market in recent years.

The average 5-year ROE for HCL Tech stands at 25.79%. 

Handy Tips Before Making Investment Choices!

Investment is a big deal, and you cannot just blindly throw away your money on a good-looking stock. All that glitters is not gold! Remember? Here are a few tips to help you with your investment choices:

  • Pinpoint the company's verticals and proportion of the income they provide to the whole. IT firms support several industries, including banking, insurance, pharma, CMT, E&U, and manufacturing. 
  • Look for businesses that have a wide range of product and service offerings. Greater profits are made possible by focusing on sectors with more stability and better development potential.
  • Map out where money is coming from amongst the best IT stocks in India— the United States, Europe, and Asia are only a few of the regions that IT firms serve. 
  • Examine the percentage of sales generated from each demographic.
  • Determine the company's financial standing through indicators like ROE, Return on Capital Employed (ROCE), Price to Earnings (P/E), and Cash Flow from Operations (CFO).

When estimating a company's potential for profit or IT Penny Stocks, investors should also consider the quality of the products on sale and the volume of incoming orders. 

As technological advancements may have severe repercussions for a company, it's also essential to keep an eye on how much the firm spends on research and development.

The Bottom Line

With the Indian economy on the rise, there has never been a better time to invest in IT stocks. India is home to some of the world's leading IT companies, and its stocks are predicted to continue growing in value. So if you're looking for a safe and profitable place to invest your hard-earned money, India's IT sector is a great option.

So what are your thoughts? Would you like to invest in the top IT stocks in India or do you have some other favs? We would love to know your opinion in the comments!

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Shristi Jain

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Shristi is the Yuvraj Singh of the Finology team. There is absolutely nothing that she cannot do. From beating the bests in table tennis to starting random Twitter spaces for product teams, she has got everyone's back! While she is a great mother to Finology Ticker, she also likes to write sometimes. As a side job, she likes to roast people. 

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