At a time when there is talk of a slowdown in the US and Europe, as many as 16 stocks from the information technology sector have rallied more than 200% in just 1 year. With a surge of 3,660%, Archana Software emerged as the top gainer.
Share price of the little-known IT services companies rallied to Rs 121.44 on February 22, 2024 against Rs 3.23 a year ago. For the nine-month ended December 2023, Archana Software reported a loss of Rs 0.10 crore against Rs 0.09 crore in the same period a year ago.
RS Software (up 583%), Aurionpro Solutions (up 452%), Ace Software Exports (up 428%), Magellanic Cloud (up 410%) and TechNVision Ventures (up 409%) stood among other major gainers on the list.
Of late, RS Software reported a net profit of Rs 11.32 crore for nine months ended December 2023 against a loss of Rs 9.18 crore in the corresponding period ended December 2022. Likewise, the bottom line of Aurionpro Solutions jumped nearly 42% to Rs 102.49 crore during April-December 2023. Magellanic Cloud posted a growth of 14.39% YoY to Rs 64.17 crore during the same period.
Sharing his views on IT sector, Nimesh Chandan, CIO, Bajaj Finserv AMC said, “It may be prudent to have a relatively lower exposure to export-oriented tech businesses. On the other hand, certain consumer tech enterprises exhibit robust business moats and are expanding their opportunity size effectively.”
Anish Tawakley, Deputy CIO-Equity, ICICI Prudential AMC added that as global companies look for diversified outsourcing, Indian IT companies may stand as major beneficiaries.
Shares of other smallcap IT companies including Danlaw Technologies India, Ceinsys Tech, Olatech Solutions, Megasoft, Quick Heal Technologies, Newgen Software Technologies, Alphalogic Techsys, Zen Technologies, IZMO and Response Informatics also gained somewhere between 200% and 385% in the last one year.
According to Axis Securities, despite the delay in automation spending (especially from North America), deal wins remained strong Q3FY24. “Many Indian IT service companies see the demand for new edge technology like generative AI, IoT Machine learning etc despite the lack of near-term visibility. The attrition rate has dropped as we see some easing on the supply-side constraints. This would help IT service companies improve their operating margins. Management of majority of IT majors sees pickup in demand from FY25 and likely to ramp-up deals as soon as uncertainties will settle down,” the brokerage said.
From the IT space, Axis Securities is bullish on Coforge (target price: Rs 6,905), Persistent Systems (target price: Rs 9,570) and KPIT Tech (target price: Rs 1,750).
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