Best IT Stocks to Buy in India 2023
The best IT stocks to buy allows an investor to capture and build an exposure to the structural shift happening in the world with digitalisation and the move to incorporate technology in all the legacy way of doing things.
The IT pack is anchored on India’s human capital prowess along with significant labour arbitrage in terms of pricing and cost that provides a competitive advantage to India.
Although this labour arbitrage has been moderating given the entry of new competitors from other countries, the established reskilling network has allowed Indian IT firms to step up their game as the market moves towards newer technical capabilities such as artificial intelligence.
What are IT stocks?
IT, or information technology, stocks can be segregated into hardware, software services and internet packs, although it has been mostly linked to the services side of the equation given the fast clip growth in that segment over the last two decades.
The best IT stocks to buy can be filtered by applying various parameters to shortlist the hundreds of companies that are engaged in the sector with varying sizes. We looked at the overall universe but then factored out very small companies with revenues of under Rs 500 crore. We then looked at companies that recorded double-digit net profit growth last year and positive net income rise in the latest quarter ended June 30.
List of Top 10 IT Stocks
- Nucleus Software
- Cigniti Tech
- Tata Elxsi
- Persistent Systems
- L&T Technology
- KPIT Technologies
- Happiest Minds
Overview of Best IT Stocks
Nucleus Software: The software product company provides lending and transaction banking products to global financial leaders. It powers the operations of over 200 financial institutions in more than 50 countries, supporting retail and corporate lending, cash management, mobile and internet banking. Its products facilitate more than 26 million transactions per day, managing over $500 billion of loans. Its key products include FinnOne NeoTM, FinnAxiaTM and PaySe.
Cigniti Tech: A small cap firm, Cigniti offers end-to-end digital assurance and digital engineering services to global enterprises across verticals such as banking and financial services, healthcare and life sciences, retail, telecom, and others. Its services help enterprises implement digital transformation practices and accelerate the launch of secure applications. Its digital engineering expertise span across data and insights, business intelligence/visualization, AI/ML, product and platform engineering, blockchain and intelligent automation.
Tata Elxsi: Often overshadowed by its bigger brother TCS in the stable of companies owned by the Tatas, Tata Elxsi is no small name. It is amongst the world’s leading providers of design and technology services across industries including automotive, broadcast, communications, healthcare, and transportation. The firm helps customers reimagine their products and services through design thinking and the application of digital technologies such as IoT (Internet of Things), cloud, mobility, virtual reality, and artificial intelligence.
Persistent Systems: With over 23,000 employees across 21 countries, Persistent Systems is a global services and solutions company delivering digital engineering and enterprise modernization. The company had a disappointing run between 2013 and 2020 wherein its shares just about doubled in seven years but it has been on a tear since then, having multiplied over 10 times in the last three years.
Coforge: Coforge was created by private equity firm Baring PE Asia a few years ago after it bought NIIT Technologies and rebranded the business. It is a global digital services and solutions provider, that enables its clients to transform at the intersection of domain expertise and emerging technologies to achieve business impact. Coforge leads with its product engineering approach and leverages cloud, data, integration and automation technologies to transform client businesses into intelligent, high growth enterprises. The firm has a presence in 21 countries with 25 delivery centers across nine countries.
L&T Technology: L&T Technology Services is into engineering and R&D (ER&D) services. With 1,145 patents filed and 102 innovation and R&D design centers for 57 of the Global Top 100 ER&D spenders, the firm has been engaged with innovations such as world’s first autonomous welding robot and solar ‘connectivity’ drone, among others. It specializes in disruptive technology spaces such as 5G, artificial intelligence, collaborative robots, digital factory, and autonomous transport. It is a subsidiary of Larsen & Toubro, the $21 billion Indian conglomerate operating in over 30 countries.
KPIT Technologies: It is an independent software integration partner to global automotive leaders, focused on automotive & mobility with a worldwide footprint and direct presence in Germany, Americas, Japan, India, Korea and China. It says it is the only embedded software company with deep domain expertise across CASE (Connected, Autonomous, Shared, Electrified) domains.
Happiest Minds: It enables digital transformation for enterprises and technology providers by leveraging a spectrum of disruptive technologies such as: artificial intelligence, blockchain, cloud, digital process automation, internet of things, robotics/drones, security, virtual/augmented reality, etc. Its capabilities span digital solutions, infrastructure, product engineering and security. The company delivers these services across industry sectors such as automotive, BFSI, consumer packaged goods, e-commerce, edtech, engineering R&D, hi-tech, manufacturing, retail and travel, transportation and hospitality.
Mphasis: Created over three decades ago, Mphasis serves marquee customers across the globe including six top global banks, eleven out of fifteen top mortgage lenders, and three top global insurance companies and has about 37,500 employees across 21 countries. A few years ago, private equity firm Blackstone acquired Hewlett Packard Enterprise's 60.5% stake in Mphasis.
Infosys: One of the top names in the IT pack, has been into software and ITeS segments with a consistent performance through the years. The firm has presence across over 56 countries with its over 3.3 lakh employees. Infosys is into next-generation digital services and consulting. It provides clients an AI-first core, empower the business with agile digital at scale and drive constant improvement with always-on learning through the transfer of digital skills, expertise, and ideas from its innovation ecosystem.
Performance of Top 10 IT Stocks to Invest
Who Should Invest in Best IT Stocks?
Investors who look for comfort from a profit making tech company can make a bet on the best IT stocks as these scrips tend to represent fundamentally strong companies. Moreover, it can also be used to invest in companies with reasonable profit that allows such companies to consistently take advantage of dividend payouts.
Benefits of Investing in Best IT Stocks
The total shareholder returns of the best IT stocks show us how such tech companies not just offer an opportunity to get interim payouts via dividends and buybacks to tackle the rich reserves, but also an opportunity to gain over time with the share price.
Things to Consider Before Investing in Best IT Stocks
The best IT stocks need not be focus only on large cap names but one needs to go deeper and do research to look at a wider pool to identify stocks that could be in small or mid cap space, too.
How to Invest in Best IT Stocks?
Step 1: Assess one’s risk appetite and holding period
Step 2: Research on all IT stocks with multiple filters to shortlist companies with a consistent performance.
Step 3: Place a buy call on stocks in the IT pack.
Indian IT companies have stepped up their game over the last few years as the global market moves towards newer technological skills such as artificial intelligence. However, to choose the best IT stocks to invest in, one must factor in not just large-cap stocks but also diversify the risk via bets across small and mid-cap spaces too. Our list has a mix of small, mid and large-caps IT stocks that one can consider for investing.
Frequently Asked Questions
Is it safe to invest in best IT stocks?
Investing in best IT stocks is as safe as it gets. This is because due to the nature of business and high margins, that allows all these companies to be profit making ventures.
Is it worth investing in hardware stocks in 2023?
Hardware stocks have been overshadowed over the years by service companies. That said, one may still make some money from hardware stocks but one should look at software companies more closely to gain from the market.
How much should I invest in best IT stocks?
IT firms need to be part of one’s portfolio given their success in wealth creation through the years. Given the anticipation around an impending economic slowdown in the developed world and the rerating that followed, many IT stocks are currently trading at a reasonable valuation and one may allocate a fourth of their portfolio to such stocks.
Who is the market leader in IT sector?
Tata Group’s flagship TCS is the largest among its peers.