A Sectoral Overview: NIFTY IT

The Information Technology sector or IT sector in India is responsible for the employment of 4.36 million Indians. In 2020, this sector accounted for 8% of India’s GDP. 

 

The IT sector in India consists of two major components: IT Services and Business Process Outsourcing (BSP). 

 

Major nations have invested heavily in Indian IT because of its fundamental skills and strengths. According to the Department for Promotion of Industry and Internal Trade (DPIIT) data, the industry placed second in terms of FDI inflows. 

 

The majority (two-thirds) of the IT sector exports are to the United States. That is why the strengthening of the US Dollar with respect to the Indian Rupee is beneficial for the constituents of the IT sector.

 

Massive expansion plans worldwide and an increase in the innovative ideas of IT companies support the hypothesis of great earnings in the future. However, In this sector with the highest expectations and growth prospectus, the current valuation of IT stocks is the concern faced by many investors. 

 

(Must read: Largest stock exchanges in the world)

 

This blog seeks to explore the IT sector by exploring the various constituents of NIFTY IT: the benchmark index of the IT sector. 

 

Please note: All the data used below is used as of 24th June 2021 (EOD), the website used for data is www.screener.in and the website used for charts is www.tradingview.com.

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NIFTY IT Past Price Movement

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Constituents of NIFTY IT

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Pie Chart: Constituents of NIFTY Pharma

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1. Infosys Ltd (25.10%): 

 

Current Price: Rs. 1,559

52 week High/ Low: Rs. 1,569/693

Market Cap: Rs. 664,417 Cr

P/E: 34.4

ROE: 27.2%

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Infosys Past Price Movement

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Infosys is the largest IT company in India and the second-largest company, after Reliance based on market capitalization. Infosys and its subsidiaries provide consulting, technology, outsourcing, and next-generation digital services globally, particularly in North America, Europe and India. 

 

The company’s products and platforms include Finacle, a core banking solution; Edge suite of products; Infosys Nia, an artificial intelligence platform; Infosys McCamish - an insurance platform; Wingspan, a customizable learning platform; Stater mortgage servicing platform; Panaya automation suite; and Skava, an e-commerce suite. 

 

Infosys provides services to almost the other sectors operating in India from the financial sector to the healthcare and retail sectors.  Infosys Limited was incorporated in 1981 and is headquartered in Bengaluru, India. In the past year Infosys has delivered a 123% return to its shareholders. 

 

2. Tata Consultancy Services Ltd (24.76%): 

 

Current Price: Rs. 3,374

52 week High/ Low: Rs. 3,383/2,008

Market Cap: Rs. 1,247,912 Cr

P/E: 37.5

ROE: 39.1%

 

Tata Consultancy Services Past Price Movement

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Tata Consultancy Services is the IT part of the Tata Group. It has impeccable management and is currently the 4th largest company in India based on market capitalization.

 

It offers a myriad of services in the IT domain. TCS is involved in immense high-tech research and development activities and provides services to almost all the sectors in India. 

 

A few of the brands being used by TCS include CHROMA, a cloud-based talent management solution; ignio, a cognitive automation software product; TCS iON, an assessment platform; TAP, a procurement offering; TCS MasterCraft, a platform to automate and manage IT processes; Quartz, a blockchain solution; TCS OmniStore, a unified commerce platform;  OPTUMERA, a digital merchandising suite; TCS BaNCS, a financial platform; and Jile, an agile DevOps product Mastercraft, a platform to automate and manage IT processes. The company was founded in 1968 and is headquartered in Mumbai, India. TCS has provided a one-year return of 67.3%.

 

(Similar read: A sectoral Overview: NIFTY Metal)

 

3. Wipro Ltd (12.40%): 

 

Current Price: Rs. 549

52 week High/ Low: Rs. 564/215

Market Cap: Rs. 300,837

P/E: 27.9

ROE: 19.6%

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Wipro Past Price Movement

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Wipro Limited is a global provider of information technology (IT), consulting, and business process outsourcing services. IT Services, IT Products, and India State-Run Enterprise Services are its three business segments (ISRE).

 

The IT Services sector provides IT and IT-enabled services. The IT Products segment sells third-party IT products. The ISRE segment offers IT services to companies owned or controlled by the Indian government and different Indian state governments. The company was incorporated in 1945 and is based in Bengaluru, India. Wipro has provided a one-year return of 152%.

 

(Also read: Bright side of IT)

 

4. Tech Mahindra Ltd (9.69%):

 

Current Price: Rs. 1,080

52 week High/ Low: Rs. 1,093/536

Market Cap: Rs. 104,651 Cr

P/E: 23.6

ROE: 19.0%

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Tech Mahindra Past Price Movement

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In the Americas, Europe, India, and other parts of the world, Tech Mahindra Limited provides information technology (IT) services and solutions. The firm is divided into two segments: IT Business and Business Processing Outsourcing (BPO). 

 

Openet, ChampTrax, Lucideus, and eNate Limited are among Tech Mahindra Limited's strategic partners. The firm is located in Pune, India, and was formed in 1986.

 

5. HCL Technologies Ltd (9.08%): 

 

Current Price: Rs. 990

52 week High/ Low: Rs. 1,074/545

Market Cap: Rs. 268,571 Cr

P/E: 24.1

ROE: 20.0%

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HCL Technologies Past Price Movement

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HCL Technologies Limited is a global provider of software development, BPO, and infrastructure management services. HCL Technologies Limited has partnered with Alteryx, Inc. to improve analytics automation and digital transformation for Global 2000 companies, as well as Moogsoft, Inc. to offer a solution for automated IT incident response. The company was founded in 1976 and is headquartered in Noida, India.

 

6. Larsen & Toubro Infotech Ltd (5.27%): 

 

Current Price: Rs. 4,185

52 week High/ Low: Rs. 4,500/1,881

Market Cap: Rs. Cr 73,150

P/E: 37.8

ROE: 30.5%

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Larsen & Toubro Infotech Past Price Movement

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Larsen & Toubro Infotech Limited is a technology consulting and digital solutions firm operating in India, North America, Europe, Asia Pacific, and worldwide. It works in banking, financial services, insurance, energy, media, retail, and other sectors.

 

Larsen & Toubro Infotech Limited and Amazon Web Services, Inc. have signed a strategic partnership agreement to focus on migration and modernization, SAP application workloads, data analytics, and the Internet of Things. The company was incorporated in 1996 and is based in Mumbai, India. Larsen & Toubro Infotech Limited is a subsidiary of Larsen & Toubro Limited.

 

7. MphasiS Ltd (4.71%):

 

Current Price: Rs. 2,049

52 week High/ Low: Rs. 2,134/846

Market Cap: Rs. 38,354 Cr

P/E: 31.5

ROE: 19.7%

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Mphasis Past Price Movement

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Mphasis Limited is a global provider of information technology solutions with a focus on cloud and cognitive services. The company operates through Banking and Capital Market, Insurance, Information Technology, Communication and Entertainment, and Emerging Industries segments.

 

 It has entered into a cooperation with R3 to create blockchain-based payment systems. Mphasis Limited is situated in Bengaluru, India, and was founded in 1992.

 

(Related reading: A sectoral Overview of NIFTY Pharma)

 

8. MindTree Ltd (4.41%):

 

Current Price: Rs. 2,553

52 week High/ Low: Rs. 2,548/910

Market Cap: Rs. 41,721 Cr

P/E: 37.6

ROE: 29.7%

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MindTree Price Movement

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In India and worldwide, Mindtree Limited and its subsidiaries provide digital transformation and technology services. Retail, CPG, and Manufacturing; Banking, Financial Services, and Insurance; Communication, Media, and Technology; and Travel and Hospitality are the company's four segments.

 

The company was founded in 1999 and is headquartered in Bengaluru, India. Mindtree Limited is a subsidiary of Larsen & Toubro Limited.

 

9. Oracle Financial Services Software Ltd (2.38%):

 

Current Price: Rs. 3,598

52 week High/ Low: Rs. 3,795/2,635

Market Cap: Rs. 30,986 Cr

P/E: 17.6

ROE: 26.3 %

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Oracle Financial Services Past Price Movement

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Oracle Financial Services Software Limited is a global provider of the financial services sector, information technology (IT) solutions and business processing services. Product Licenses and Related Activities, IT Solutions and Consulting Services, and Business Processing Outsourcing Services are its three segments.

 

The company was incorporated in 1989 and is based in Mumbai, India. Oracle Financial Services Software Limited is a subsidiary of Oracle Global (Mauritius) Limited.

 

10. Coforge Ltd (2.20%):

 

Current Price: Rs. 4,073

52 week High/ Low: Rs. 4,100/2,232

Market Cap: Rs. 24,678 Cr

P/E: 52.7

ROE: 19.3 %

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Coforge Past Price Movement

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COFORGE Limited provides information technology (IT) and IT-enabled services in the Americas, India, Europe, the Middle East and Africa, and the Asia Pacific. The company offers Tron intelligent automation services, including business process automation, IT operations automation, robotic process automation and a wide variety of other services, including cybersecurity, infrastructure management, banking, etc.

 

The company was formerly known as NIIT Technologies Limited and changed its name to COFORGE Limited in August 2020. COFORGE Limited was incorporated in 1992 and is based in New Delhi, India.

 

 

Final Note

 

The IT industry in India and all over the world has seen tremendous growth in the past two decades. The Dot-Com bubble in the late 1990s was the last serious hurdle witnessed particularly by the IT industry. The bubble was formed due to an excessive amount of speculation in IT stocks all over the world.

 

Since the dot-com bubble the IT industry in India and all over the world has witnessed a huge up-move much larger than the one preceding the bubble. The other recent drop in the prices witnessed by the IT industry was during the Covid-19 crisis in March last year. 

 

(Must read: Covid-19 impacts on financial markets)

 

Much to the surprise of a lot of investors and speculators, all of the losses experienced by the IT stocks were rapidly recovered. These companies did not only recover all the losses, they more than doubled post the recovery, such is the strength of the current bull market.

 

This miraculous rally in the IT stocks is attributed to the phenomenal results posted by these companies in the recent quarters. Covid-19 even though it disrupted a lot of economic activity, it was good to the IT sector which got a boost in the demand of its services in the past year.

 

However, the P/E ratio of 29.53 of NIFTY IT concerns a lot of market participants. Usually a P/E ratio in the 15-20 range is considered justifiable. The stock markets are forward looking in nature, since the earnings are expected to increase at a pretty decent rate in the years to come, some sort of time based correction is expected of the NIFTY IT index.