Top AI stocks in India to Watch Out For in September 2023

Artificial Intelligence (AI) is undergoing rapid evolution, manifesting once-fantastical experiences into tangible reality.
In a world transformed by AI’s influence on how we live and work, investors seek avenues to engage with this pioneering technology. Machine learning and AI constitute the fundamental essence of the ongoing technological revolution. With the potential to revolutionize nearly every major industry, these innovations have attained a level of ubiquity akin to smartphones.

With the launch of OpenAI’s ChatGPT, a lot of companies have launched their AI products, or is preparing themselves to rule with the help of Artificial Intelligence.

In this post, we aim to offer a clearer understanding of Artificial Intelligence and its business applications. Furthermore, we’ve delved into burgeoning AI stocks within this domain that enjoy substantial popularity.

The Indian Artificial Intelligence Industry: An Overview

Artificial Intelligence involves the emulation of human cognitive functions by machines, particularly computer systems. This encompasses various AI applications such as expert systems, natural language processing, speech recognition, and machine vision.

India, having adept expertise and adaptable solutions, demonstrates exceptional execution capabilities in the realm of AI. The nation’s swift transition from paper-based to digital governance during the pandemic underscores its prowess. India boasts an abundance of both data and people.

This convergence has propelled the proliferation of AI initiatives, leveraging digital readiness and the utilization of platforms like modular UPI transactions and centralized data storage in DigiLocker. The cross-industry application of AI for intelligent automation, expedited processes, conflict resolution, and more exemplifies the distinctive “Indian Secret Sauce” that underscores the AI landscape.

Future of AI in India

The future of AI in India is poised for remarkable growth, with the market expected to surge from US$ 3.1 billion in 2020 to US$ 7.8 billion by 2025, driven by a projected CAGR of 20.2%. The job market is predicted to see a 31.4% increase in AI-related positions by 2030.

Industries like agriculture, healthcare, education, and defence are undergoing transformative changes through AI integration. Government initiatives, such as the inclusion of AI in schools and increased funding for the Digital India mission, highlight India’s commitment to AI-driven advancements.

Collaborations between tech giants and industries, as well as the proliferation of startups, underscore the far-reaching impact AI is set to have on India’s societal and economic landscape.

How to invest in AI stocks?

Factors considered for the following Artificial Intelligence Stocks

1. Market Cap

We have chosen only those artificial intelligence companies whose market cap is greater than 5000 Crore INR

2. Price to Earning Ratio

The better a artificial intelligence stock’s performance, the lower its price-to-earnings ratio tends to be.

3. Sales

We have selected artificial intelligence companies with an Average Sales Growth (3 years) of more than 10%.

4.Profit

The following list consists of artificial intelligence companies whose Average Profit growth (3 years) > 10%.

Top AI stocks to watch out for in India

Oracle Financial Services Software Ltd

Oracle Financial Services Software Ltd delivers financial software, tailor-made application development, advisory, management of IT infrastructure, and delegated business processing solutions for the financial services sector. Established in 1989, the company operates from its headquarters in Mumbai, India. It operates as a subsidiary of Oracle Global (Mauritius) Limited.

• Market Cap – ₹ 34,957 Cr.
• Current Price – ₹ 4,039
• High / Low – ₹ 4,145 / 2,883
• Stock P/E – 19.3
• ROE – 24.8 %

The company boasts a nearly debt-free status, signifying its robust financial position. Furthermore, the stock offers an attractive dividend yield of 5.72%, presenting a compelling proposition for investors seeking income. With a commendable track record, the company has achieved a consistent return on equity (ROE) over the past three years, averaging at 24.8%. Demonstrating a commitment to shareholders, the company maintains a healthy dividend payout ratio of 97.4%. However, it’s worth noting that the company’s sales growth over the past five years has been modest, with a rate of 4.71%.

Wipro Ltd

Wipro Limited (“Wipro” or the “Parent Company”), along with its subsidiaries and managed trusts, operates as a global entity in the field of information technology (“IT”), consulting, and business process services (“BPS”). Wipro is an Indian public limited company incorporated and based in India.  The Company holds its primary listing on the BSE Ltd. and the National Stock Exchange of India Ltd. Furthermore, the Company’s equity shares are represented through American Depository Shares (“ADS”), which are also traded on the New York Stock Exchange.

Among Indian contenders in the global IT services sector, Wipro holds the position of being the fourth-largest, following TCS, Infosys, and HCL Technologies.

• Market Cap – ₹ 2,23,568 Cr.
• Current Price – ₹ 407
• High / Low – ₹ 426 / 352
• Stock P/E – 19.2
• ROE – 15.9 %

Over the past three years, the sales growth has maintained a robust pace, demonstrating a healthy increase of 13.96%. Similarly, the sales growth remains favorable in the most recent four quarters, recording a solid rate of 11.54%. However, there has been a decline in the Return on Equity (ROE) compared to the average of the preceding three years, settling at 16.50%. Furthermore, the net profit has experienced subdued performance over the last three years, registering a modest growth rate of 6.56%.

HCL Technologies Ltd

HCL Tech stands as a prominent global IT services firm, holding a place among the top five Indian companies in the field, considering revenue. Emerging onto the global stage following its IPO in 1999, HCL Tech has centered its efforts on groundbreaking outsourcing endeavors. Its comprehensive range of services encompasses software-oriented IT solutions, remote infrastructure management, engineering and research and development services, as well as business process outsourcing. Making the most of its expansive offshore infrastructure worldwide and a widespread presence across 46 countries, the company is adept at delivering a diverse array of services across crucial industry sectors.

• Market Cap – ₹ 3,17,634 Cr.
• Current Price – ₹ 1,170
• High / Low – ₹ 1,203 / 882
• Stock P/E – 21
• ROE – 23.0 %

The company has successfully decreased its debt burden, resulting in its near debt-free status. This positive financial stance is further highlighted by the stock’s attractive dividend yield of 4.18%, offering an appealing return for potential investors. Additionally, the company has consistently upheld a robust dividend payout ratio of 65.5%, underscoring its commitment to rewarding shareholders.

Infosys Ltd

Infosys Ltd delivers a spectrum of services encompassing consulting, technology, outsourcing, and innovative digital solutions, all tailored to facilitate clients in realizing their digital transformation strategies. Notably, it holds the position of being the second-largest Information Technology company in India, trailing behind TCS.

• Market Cap – ₹ 5,95,639 Cr.
• Current Price – ₹ 1,435
• High / Low – ₹ 1,673 / 1,185
• Stock P/E – 24.1
• ROE – 31.8 %

The company boasts a commendable track record of return on equity (ROE), with a strong performance over the past three years, averaging at 31.8%. This reflects its consistent ability to generate favorable returns for its shareholders. Additionally, the company has upheld a robust dividend payout ratio of 58.8%, underscoring its commitment to distributing value to its investors. In terms of valuation, the stock is currently trading at a multiple of 8.01 times its book value, signifying its position relative to its intrinsic worth. It’s worth noting that the promoter holding in the company is relatively low, at 14.9%, which can have implications for decision-making and governance within the organization.

Tech Mahindra Ltd

Tech Mahindra Ltd offers an extensive array of IT services, encompassing IT-enabled solutions, application development and maintenance, consultancy, and enterprise business solutions, among others. These services are catered to a diverse clientele across various industries, highlighting the company’s commitment to meeting the diverse technological needs of its corporate customers.

• Market Cap – ₹ 1,16,720 Cr.
• Current Price – ₹ 1,197
• High / Low – ₹ 1,271 / 981
• Stock P/E – 26.6
• ROE – 17.6 %

The company has consistently upheld a robust dividend payout ratio of 75.7%, showcasing its dedication to providing valuable returns to its stakeholders. However, it’s worth noting that the company has experienced lackluster sales growth over the past five years, with a modest rate of 11.6%. This performance indicates that the company might have encountered challenges in expanding its top-line revenue during this period.

Mphasis Ltd

Established in August 1992, Mphasis Limited stands as a global provider of IT solutions, specializing in delivering cloud and cognitive services tailored for enterprises. Over the years, the company’s journey has been marked by significant milestones. Through the application of cutting-edge technology, the company aids global enterprises in their business transformation endeavors. a series of fruitful collaborations and transactions, which notably encompassed divesting a considerable portion of its domestic business to Hinduja Global Solutions and Karvy Data Management Services Limited (KDMSL), Mphasis Limited further solidified its trajectory. 

• Market Cap – ₹ 44,602 Cr.
• Current Price – ₹ 2,366
• High / Low – ₹ 2,493 / 1,660
• Stock P/E – 27.3
• ROE – 21.9 %

The company has successfully managed to decrease its debt burden, resulting in its near debt-free status. Additionally, the company has consistently upheld a robust dividend payout ratio of 72.6%, showcasing its commitment to rewarding its shareholders. During the quarter of June 2023, retail investors have demonstrated a noticeable increase in their holdings, with their ownership rising from 5.65% to 6.08%. Impressively, MPHASIS stock has showcased a significant upward trajectory over the span of three years, marking a remarkable 98.2% increase. 

Tata Consultancy Services Ltd

Tata Consultancy Services stands as the flagship entity within the Tata group, renowned for its extensive history spanning over 50 years. Functioning as an IT services, consulting, and business solutions establishment, TCS has played a pivotal role in collaborating with numerous global giants, guiding them through transformative endeavors. Utilizing a consulting-centered and cognitive-driven approach, TCS provides an integrated suite of services and solutions that encompass business, technology, and engineering domains.

• Market Cap – ₹ 12,40,776 Cr.
• Current Price – ₹ 3,391
• High / Low – ₹ 3,575 / 2,926
• Stock P/E – 28.4
• ROE – 46.9 %

The company exhibits a nearly debt-free status, indicating its strong financial position. Impressively, the company has consistently achieved a commendable return on equity (ROE) performance, with an average ROE of 43.3% over the past three years. Further highlighting its commitment to shareholders, the company maintains a healthy dividend payout ratio of 61.4%. In terms of operational efficiency, the company’s working capital requirements have notably reduced, decreasing from 43.6 days to 32.8 days. Moreover, the stock is currently trading at a multiple of 14.0 times its book value, reflecting its valuation in relation to its intrinsic worth.

LTIMindtree Ltd

Larsen & Toubro Infotech Ltd provides a comprehensive spectrum of IT services, encompassing application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions, and platform-based offerings to a diverse array of clients across various industries.

• Market Cap – ₹ 1,53,091 Cr.
• Current Price – ₹ 5,174
• High / Low – ₹ 5,430 / 4,120
• Stock P/E – 34.4
• ROE – 28.6 %

The company stands on the brink of being debt-free, underlining its solid financial position. Anticipations are high for a promising quarter ahead. Demonstrating remarkable financial performance, the company has achieved a noteworthy compound annual growth rate (CAGR) of 31.7% in profits over the past five years. Its track record is further bolstered by a consistent return on equity (ROE), averaging 28.6% over the last three years. The company’s dedication to shareholders is evident through its steady dividend payout ratio of 39.2%. Over the last ten years, the company has maintained a median sales growth rate of 15.2%. As of 31st August 2023 (pre-opening), the stock is trading at a valuation of 8.41 times its book value. It’s worth noting that the promoter holding has experienced a decline of -5.85% over the last three years, potentially indicating changes in ownership dynamics.

L&T Technology Services Ltd

Founded in 2012, LTTS operates as an engineering services provider, specializing in providing engineering, research and development (ER&D), and digitalization solutions to businesses across sectors such as Transportation, Industrial Products, Telecom and Hi-Tech, Medical Devices, and Plant Engineering. LTTS boasts a distinguished clientele, including 69 Fortune 500 companies and 53 of the foremost ER&D firms globally. Additionally, the company offers advisory services in digital engineering. Notably, LTTS made its public debut on September 23, 2016. With a widespread international presence, the company serves 296 clients across more than 25 countries, solidifying its stature as a significant player in the realm of engineering services.

• Market Cap – ₹ 46,350 Cr.
• Current Price – ₹ 4,386
• High / Low – ₹ 4,427 / 3,216
• Stock P/E – 37.5
• ROE – 25.0 %

The company maintains a near debt-free status, underscoring its strong financial position. Over the past three years, the company has consistently demonstrated a favorable return on equity (ROE), averaging at 25.0%, indicating its ability to generate value for shareholders. Furthermore, the company remains committed to providing value to its investors through a healthy dividend payout ratio of 38.0%. Presently, the stock is trading at a valuation of 9.35 times its book value, signifying its position in relation to its intrinsic worth.

Persistent Systems Ltd

Persistent Systems offers a range of services encompassing software engineering and strategic consultation, aiding enterprises in the implementation and modernization of their operations. The company boasts proprietary software and frameworks equipped with pre-built integration and acceleration capabilities. Additionally, Persistent Systems has established partnerships with prominent providers like Salesforce and AWS, further enhancing its portfolio of offerings.

• Market Cap – ₹ 39,633 Cr.
• Current Price – ₹ 5,186
• High / Low – ₹ 5,279 / 3,092
• Stock P/E – 41.3
• ROE – 25.3 %

Anticipations are positive for the company to achieve a promising quarter. Over the past five years, the company has demonstrated impressive profit growth, achieving a compound annual growth rate (CAGR) of 24.6%. Furthermore, the company has consistently upheld a robust dividend payout ratio of 36.6%, showcasing its commitment to rewarding shareholders. In terms of sales performance, the company’s median growth over the last ten years stands at 17.4%. However, it’s worth noting that the stock is currently trading at a multiple of 9.99 times its book value, indicating its valuation relative to its intrinsic worth.

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FAQs

Are AI stocks a viable investment choice in 2023?

Investing in AI stocks within India stands as a highly favourable option for multiple compelling reasons. The AI sector holds significant promise for robust returns on investments in the foreseeable future, owing to its projected rapid expansion. With artificial intelligence (AI) emerging as a pivotal asset for various industries, and India’s tech landscape flourishing, the current juncture presents an opportune moment to delve into AI stock investments, potentially reaping substantial gains.

Conclusion: Which is the best AI stock to buy in India?

Though I do not have all the AI stocks in my portfolio, however do I hold some: Wipro Ltd, Tech Mahindra, TCS to name a few. I am very bullish on this sector. If only P/E value were to be seen, then out of all these AI companies, we can see Oracle India and Wipro are fairly valued.

Artificial Intelligence (AI) has emerged as an indispensable tool across various industries, propelling India’s technology market towards rapid expansion. Its pervasive influence extends across contemporary living, influencing domains ranging from online shopping to educational data analysis.

In parallel, a surge of startups in India is on the rise, actively devising AI-driven solutions tailored for sectors like finance, healthcare, and beyond. This escalating present and future demand has acted as a magnet, pulling in businesses to embrace this trend in recent years, thus stimulating increased investment. Consequently, engaging with digital technologies presents the potential for substantial gains in the forthcoming years.

Furthermore, observing the unfolding application of AI technology across more facets of our daily routines is poised to be both captivating and transformative.

Author: Vedanti KiranVedanti is a female finance writer, currently pursuing her studies at Hansraj College. She has a passion for writing and travelling, and her articles on the stock market, finance, investment, and cryptocurrency are well-researched and informative. With her unique perspective on the world of finance, Vedanti is a go-to source for those seeking insights into the world of finance.