Top 5 Most Profitable IT stocks India

In the 1990s, the main highlight of the American economy was the “IT Revolution” and globalization took this revolution to other countries of the world, India being one of them. Earlier in the 60s and the 70s, the use of information technology was confined to only workplaces like banks, hospitals, institutions, etc. But, today, IT is commonly used in a majority of Indian households, and let’s be honest, our dependency on IT has increased consistently. From generating jobs to overall development, the IT sector opened doors for everyone, and being that said, 2001 was also declared as the IT year. In the year 2016, the IT sector contributed to India’s GDP by 7.7%. And even in the difficult times of the Covid-19 pandemic, the sector has grown immensely as people relied more on technology.

Here, we’re not going to discuss the history or the growth of the IT sector but about the IT stocks that have shown great potential in the stock market. And as wise investors, we are ought to invest our money in stocks with high growth potential.

India’s IT sector was born in Mumbai in 1967 with Tata Consultancy Services. It is the first and the largest IT company in India with a market capitalization of ?12 lakh crore. The company provides a wide range of services like IT, Consultancy, business solutions, digital transformation, and technological products and platforms. As of March 2020, the company’s ROE i.e. return on equity stands at 44.72%, and ROC i.e. return on capital employed at 52.79%. The dividend yield of the stock is 2.28%. Now, if we compare the P/E (price to earnings ratio) of the firm with that of its industry’s then it is 38.75, just 5% more from that of its industry, making it a fairly priced stock. In the last 10 years, the stock price has grown at 17% CAGR. TCS is one of the blue-chip stocks and it still has the potential to grow in the times to come.

Infosys is an Indian Multinational Company which was established in the year 1981 in Pune by seven engineers. It’s was no sooner than 1993, that Infosys came out with its IPO which got listed at ?145 in the stock market. Since then, Infosys has emerged as the second-largest IT company with a market cap of 5.82 lakh crore. It also emerged to be the fastest wealth creator between 1995 and 2020 with a CAGR of 30%. Although it is the fastest-growing stock, the P/E ratio of the company is valued at 33% which is very close to that of the industry’s 33.52%. The ROE of Infosys as of March 2020, was 24.97 but there was little to no change in the ROCE ratio. The dividend yield of the company is 1.28%.

It is a large IT service provider in India which offers various services like Analytics, Testing, ADM, Infrastructure Services & Security, and Enterprise Solutions. The company not only provides the above-mentioned services in India but also in the North- American, European and Asian continents. The company’s market capitalization is not more than ?71 thousand crores and a CAGR of 16.7%. The ROE and the ROCE of L&T infotech are 29.68 and 33.35 respectively. Currently, the stock is a little expensive with a P/E ratio of 36.88. The company also offers a dividend yield of 0.68% only.

Wipro Limited is a Banglore based Indian Multinational corporate company that masters in providing information technology, consulting, and business process services. Although the company has given a CAGR of 3.3% in 5 years, the company’s P/E ratio is 24.71% which is way less than that of its peers. The company has a market capitalization of 2.27 lakh crores and it gives a dividend yield of 0.24%. Nevertheless, the stock is grown consistently which can be seen by the growth in the ROE and ROCE which is at 18.68% and 23.62% respectively. Both these factors have grown by 3% YoY. A low debt company with zero promoter pledge is one of the strengths of this stock.

Earlier, this company was a part of the Larsen & Turbo Group but later it got separated in the year 1999. The company deals in various disciplines like e-commerce, mobile applications, cloud computing, digital transformation, data analytics, Testing, enterprise application integration, and enterprise resource planning. The company has shown a consistent CAGR growth of 10.58% in just one year. Currently, the company has a market capitalization of ?34k crores. The dividend yield of the company is relatively low at 0.62%. Mindtree’s ROE stands at 19.98% and ROCE at 23.00% as of March 2020. This stock remains a fairly valued stock with a P/E of 34.41. This stock has a consistent financial performance, quality management, and strong technical momentum.

Don’t time the stock market. IT sector has shown its potential in few years but, nevertheless, it still has potential to grow and give good, satisfactory returns. With the pandemic, we saw how people shifted to technology and this shift is here to stay giving the above-mentioned companies as well investors many opportunities. Because ‘Consistency is the key’.

(Disclaimer: The above-mentioned figures are subject to change)