This curated collection of stocks includes the top Information Technology stocks listed in Indian stock exchanges. IT stocks are a core part of the Indian equity markets and are among the top large cap stocks anyone can hold.
IT stocks consist of companies such as Infosys, Wipro, HCL Tech, Tech Mahindra and so on which collectively have a heavy influence on the Nifty50 index.
IT stocks since 2020 have been in great demand due to the coronavirus pandemic and the rise of work from home opportunities, however steady rise in global interest rates and recession worries in 2022 have acted as an overhang on such stocks.
The Nifty IT index has generated more than 20% CAGR (compound annual growth rate) over the past five years ending March 2023.
The IT sector in India has been one of the fastest-growing, with sustained revenue and profit growth. For instance, the Nifty IT index
Indian IT firms have a strong global presence, with a large amount of their revenue originating from abroad markets.
The IT sector runs on a technology-driven business model that necessitates ongoing innovation and improvement.
When compared to other industries, the IT sector requires little capital input.
Infosys, Wipro, Tech Mahindra, Coforge, L&T Infotech and TCS are the major players within this space. Let’s understand why these companies are considered to be top IT stocks:
Infosys has consistently provided significant returns to its shareholders. The stock has gained nearly 11,000% since its inception in 1999 and is also among the top most valued Indian companies based on market capitalization.
Wipro shares were also listed in exchanges in 1999 and have recorded returns of 2500% since. The company has consistently reported strong earnings and is also a global player with offices in over 160 countries.
Tata Consultancy Services shares were listed in 2004 and have gained about 2400% ever since. TCS is among the top consultancy firms globally and has its business interests spread across 46 countries. TCS is India’s largest IT firm in terms of revenues. It reported revenues of Rs 58,229 crore in 2022.
IT stocks in India have most of their income from overseas, which makes them highly susceptible to global economic changes.
Here are a few things to keep in mind while analyzing IT stocks:
IT shares are highly sensitive to interest rate changes. An investor in IT stocks must have an understanding of local market interest rates as well as international interest rates to judge the future course of IT stocks.
Most IT stocks like TCS, Infosys have majority of their income come from the US and Europe and not from India. The performance of the dollar and the euro also hold a significant influence on IT stocks
Like any other stock, it is important to know how the company has performed financially over the past quarters. A sound understanding of a company’s financial performance is a prerequisite for investing.
IT sector has many regulatory requirements and different governing bodies especially related to data and privacy. It is important to be aware of such changes.
IT shares are generally considered to be riskier investments because they have a tendency to react to quick economic changes and factors such as inflation, interest rates and foreign exchange rates.
Investing in IT stocks is preferable for investors who want to invest for a longer period of time and have more risk taking capability as IT stocks can be slightly volatile in the short term.