4 'Digital India' Stocks to Add to Your 2022 Watchlist

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  • Jan 28, 2022 - 4 'Digital India' Stocks to Add to Your 2022 Watchlist

4 'Digital India' Stocks to Add to Your 2022 Watchlist

Jan 28, 2022

Due to the pandemic, we're seeing a rising need for IT solutions.

Luckily, India has taken on an initiative - Digital India - which has put the companies focusing on digitization, in limelight.

The 'Digital India' campaign was launched in 2015 by the government of India to improve the digital and online infrastructure in the country. It aimed to promote the provision of government services electronically to citizens.

As a part of this initiative, the government planned to improve connectivity in rural areas with facilities like high-speed internet.

Make no mistake, this is a megatrend happening in front of us. As the Digital India megatrend picks up pace, there will be companies that benefit from it for years to come.

Last year in October 2021, we wrote to you about the top 5 'Digital India' stocks.

In the article, we listed out ITI, Sterlite Technologies, Tech Mahindra, RailTel Corp, and Nelco.

Let's look at a few other stocks which are riding India's Digital India megatrend...

These companies are spearheading and benefitting from the digital revolution in India.

#1 Cyient

With its niche offering in domains such as aerospace & defence, communication, transportation, and semiconductors, Cyient has established itself with healthy growth over the years.

Towards digital transformation, the company is working on several fronts.

Last financial year Cyient acquired Cyient DLM to impart system integration and prototyping capabilities in its engineering services thus enabling to provide design-to-production solutions to clients.

Cyient's recent acquisition of WorkForce Delta has already strengthened its digital solutions suite, IntelliCyient.

The company has also expanded its digital solution portfolio for the aerospace industry. Further, it has also joined forces with leading industry forums like TM Forum to accelerate the technology-led transformation.

The company also achieved select tier status in the Amazon Web Services (AWS) partner network with its evolving expertise in digital transformation solutions.

From humble beginnings as a GIS data conversion vendor, Cyient has transformed to a formidable engineering player operating in critical sectors such as aerospace, defence, communications, and utilities - sectors which, incidentally, contribute a lion's share to the company's overall revenues.

Over the year gone by, shares of the company have gained 43% as compared to BSE Sensex's 21% gain.

To know more about the company, check out Cyient's 2020-21 annual report analysis.


Next on our list we have Himachal Futuristic (HFCL), a diverse telecom infrastructure enabler with active interest spanning telecom infrastructure development, system integration, and manufacture and supply of high end telecom equipment, optical fiber, and optic fiber cable (OFC).

How does HFCL form part of this list? The company has good growth prospects for the next few years as fiber optics is one of the main requirement when India switches to a 5G network.

OFCs will remain in demand as 5G trials are already underway. Just recently, HFCL announced that CommAgility's 5G new radio software will be used in its 5G indoor small cells.

The company also has close links with Jio which tightens its link to the Digital India initiative.

The Indian telecom sector is at an inflection point. In the annual report, the company has mentioned that as Government of India focuses on rural connectivity through Digital India drive, HFCL is prepared for the next big upgrade.

HFCL's dedicated R&D centre is developing a next-gen 5G and Wi-Fi product portfolio and system integration services.

Having the largest market share in the OFC supplies in India and being the largest producer of Wi-Fi systems, HFCL looks set to grow by leaps and bounds.

It's no wonder investors are already factoring the tailwinds of digitisation. Have a look at the chart below. It shows HFCL's spectacular performance on the bourses.

#3 TCS

Now this is a no brainer. You probably thought of Tata Consultancy Services (TCS) when you started reading this article.

In its latest quarterly result presentation, TCS said that it believes the Indian market will be platform-driven as more businesses and government entities digitise their processes.

TCS chief N Ganapathy Subramaniam said the company is positioning itself to provide apps and platforms to integrate with India's digital stack and provide solutions to customers in government, industry, and even B2C.

While most of the IT companies, be it large or mid-sized, have worked towards increasing their digital reach, the top 2 companies - Infosys and TCS have leveraged the opportunity better. Both the companies have bagged major government projects and positioned their platform offerings.

Both companies have consistently raised revenue forecast, expecting tech spending to continue, particularly for digital services such as the cloud.

Over the year gone by, shares of TCS have gained 12% while Infosys has fared better with 28% gains.

#4 Tata Elxsi

Another Tata group company to feature in this list is Tata Elxsi.

The company is already seeing significant growth in all primary vertical it operates through digital transformation. In the automotive market, Tata Elxsi has received large and strategic deals with both OEMs and suppliers across electric and autonomous segment.

Tata Elxsi is among the world's leading providers of design and technology services across industries including auto, media, communications, and healthcare.

From Artificial Intelligence (AI), Internet of Things (IoT), big data analytics, cloud, mobility, virtual reality, driverless cars, electric vehicles (EVs), to semiconductors - the company is riding megatrends of many new-age technologies.

As the company offers opportunities on new-age technologies, the post pandemic scenario has made this opportunity bigger. Since Tata Elxsi focuses on high-growth sectors and emerging technology areas, its growth story remains intact.

This can be seen from its stock price performance. Even as the company is trading at expensive valuations, investors are betting big on the company's future.

Going forward, Tata Elxsi hopes to leverage the digital push set in motion by the pandemic.

To know more, check out Tata Elxsi's financial factsheet and latest quarterly results.

Snapshot of digitisation stocks in India from Equitymaster's stock screener

Here's a quick view at companies focusing on Digital India based on crucial financials.

Please note these parameters can be changed according to your selection criteria.

This will help you in identifying and eliminating stocks that are not meeting your requirements and give emphasis on those stocks that are well inside the metrics.

Is there an index which tracks Digital India stocks?

Last year in December, NSE's subsidiary, NSE Indices launched a digital index that tracks the performance of companies exposed to the digital theme.

This index aims to track the performance of a portfolio of stocks that broadly represent the digital theme within basic industries like software, e-commerce, IT-enabled services, industrial electronics, and telecom services companies.

Digitisation is happening rapidly and is touching every aspect of our lives.

To give a further boost to digital theme, companies are accelerating the pace of transformation. For instance, RailTel Corporation is setting up the Edge Data Centres (EDCs) with other partners. This is aimed at accelerating the pace of digital transformation and efficient digital delivery in rural and semi-urban areas.

RailTel has been working with Indian Railways to transform railway stations into digital hubs by providing public Wi-Fi at railway stations across the country for a long time now.

Meanwhile, India got another boost today as Google has partnered with Bharti Airtel. The company plans to invest nearly Rs 75 bn to help grow India's digital ecosystem.

As companies are focusing on shaping and growing their ecosystem to accelerate their digital transformation, India has emerged as the largest and fastest-growing market of digital consumers.

India's internet economy has witnessed a sharp rise in the last 5 years, with the rise in affordable smartphones and data consumption.

US$ 100 bn+ digital payments were recorded in India in 2021. The number of internet users in the country has increased by 8.2% (47 m) between 2020 and 2021.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Equitymaster requests your view! Post a comment on "4 'Digital India' Stocks to Add to Your 2022 Watchlist". Click here!

1 Responses to "4 'Digital India' Stocks to Add to Your 2022 Watchlist"

Janardan Mohanty

Jan 28, 2022

If RailTel is the only company entrusted with the responsibility of digitizing all railway stations in India, it will be such a humongous job that this small company will soon become huge.

Equitymaster requests your view! Post a comment on "4 'Digital India' Stocks to Add to Your 2022 Watchlist". Click here!

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