The Indian stock market is now the seventh largest in the world. The BSE Sensex’s total market capitalization surged to $2.7 trillion this month. Indian stocks have been among the better performers in part because of the country’s relatively quick recovery in domestic demand in the wake of COVID-19-led disruptions. This is evidenced by the iShares MSCI India Index ETF’s (INDA) 28% returns over the past three months. In comparison, MSCI iShares MSCI Emerging Markets ETF (EEM) has gained 26.7% and iShares MSCI World ETF (URTH) has gained 16.3% over the same period.
The information technology industry is a critical driver of the country’s economic growth, contributing approximately 7.7% to the country’s GDP. The core competencies and strengths of Indian information technology companies have attracted significant investments from developed countries. The computer software and hardware sector in India attracted cumulative FDI inflows of US$62.47 billion between April 2020 and September 2020.
Infosys Limited (INFY)
INFY is one of the world’s most popular technology outsourcing companies. It provides consulting, technology, outsourcing, and next-generation digital services worldwide. INFY operates through the following segments — Financial Services and Insurance, Manufacturing, Retail, Consumer Packaged Goods and Logistics, Energy, Utilities, Resources and Services, Communication, Telecom OEM and Media, Hi-Tech, Life Sciences and Healthcare, among others.
This month, Infosys McCamish Systems, the Business Process Management arm of INFY, executed the purchase of a New Business and Underwriting platform from STEP Solutions Group LLC to ease the complexity of a variety of insurance products for individuals and groups across North America. This will help Infosys McCamish in enhancing its industry leading VPAS policy administration platform to offer end-to-end business solutions in the North American insurance market.
Last month , INFY expanded the Infosys Cobalt portfolio by unveiling its applied AI cloud, which is built on NVIDIA DGX A100 systems and delivers unprecedented compute density, performance, and flexibility. This applied AI cloud should provide Infosys employees simple and fast access to AI infrastructure.
INFY’s total revenues have increased 8.4% year-over-year to $3.52 billion in the fiscal third quarter ended December 31, 2020. Its digital revenues, which represented 50% of its top-line, increased 33.6% year-over-year to $1.76 billion. This was driven primarily by a significant rise in large deals and fast-growing digital services. Its operating profit has risen 25.6% from the year-ago value to $893 million, yielding an operating margin of 25.4%, up 350 basis points over the prior-year period. Its EPS has improved 13.3% year-over-year to $0.17 over the three- month period. During its fiscal third quarter, INFY also signed multiple large deals, with total contract values of $7.13 billion, the largest in its history.
Analysts expect INFY’s revenues to grow 11.6% year-over-year to $3.57 billion for the current quarter, ending March 31, 2021. A consensus EPS estimate of $0.16 for the current quarter represents a 14.3% improvement from its year-ago value. The company has an impressive earnings surprise history; it beat the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 52.3% over the past year.
INFY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
INFY has an A grade for Quality and Stability, and B for Momentum and Sentiment. Of the 14 stocks in the A-rated Outsourcing – Tech Services Industry, the stock is ranked #5.
In total, we rate INFY on eight different levels. Beyond what we’ve stated above, we have also given INFY grades for Growth and Value. Get all INFY’s ratings here.
Wipro Limited (WIT)
WIT is a leading global information technology, consulting and business process services company. It operates primarily in the field of cognitive computing, hyper-automation, robotics, cloud, analytics and emerging technologies to help its clients adapt to the digital world. The company operates in three segments: IT Services, IT Products, and India State Run Enterprise Services (ISRE).
In November, WIT entered a strategic partnership Schneider-Neureither & Partner (SNP) SE. Under the partnership agreement, WIT will leverage SNP’s data transformation platform to allow its clients to evaluate and simulate the optimal transformation path, thereby reducing efforts and increasing the predictability of outcomes. This benefit from the combined synergies will help customers accelerate their enterprise transformation.
On December 10, the company forged a partnership with LogiNext to launch an integrated logistics platform to deliver an end-to-end solution for supply chain customers. This should l improve speed of delivery and end-recipient experience, while strengthening its global supply chain infrastructure.
And this month, WIT announced a five-year strategic partnership with Telefónica Germany/O2 to transform its Business Support Systems and associated Quality Assurance to enable superior customer experience and growth in the B2B market segment. This is a high value and first-of-its-kind engagement for WIT in the telecommunications space.
WIT’s revenues have increased slightly year-over-year to $2.15 billion in the fiscal third quarter ended December 31, 2020. The company’s income from operating activities has risen 24.2% from its year-ago value to $463 million, while its gross profit has increased 16.3% to $717 million. Its EPS has improved 20.9% year-over-year to $0.07.
Analysts expect WIT’s revenues to grow 4.7% year-over-year to $2.18 billion in the current quarter ending March 31, 2021. A consensus EPS estimate of $0.07 for the current quarter represents a 40% improvement from the year-ago value. The stock has gained 65.4% over the past year.
It’s no surprise that WIT has an overall rating of B, which translates to Buy in our POWR Ratings system. WIT has a B grade for Quality, Momentum, Stability and Sentiment. The stock is ranked #6 in the same industry.
Click here to see the additional POWR Ratings for WIT (Value and Growth).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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INFY shares were trading at $17.67 per share on Wednesday afternoon, up $0.29 (+1.67%). Year-to-date, INFY has gained 4.25%, versus a 4.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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