Introduction

Investing in AI (artificial intelligence) stocks offers exciting opportunities. AI technology’s transformative potential has the power to revolutionise various industries, making it an appealing prospect for investors. However, it is essential to acknowledge the associated risks and conduct thorough research before entering this dynamic market. This article aims to present the top five AI stocks in India in 2024.

Investing in AI stocks is a smart move due to the remarkable growth of the AI sector in India. From autonomous vehicles to healthcare, AI is reshaping various industries and paving the way for ground-breaking innovations. With the AI market in India projected to reach USD 1,597.1 billion by 2030, it’s an enticing investment avenue.

Investing in AI stocks in India can be done by purchasing shares of listed AI companies on stock exchanges or exploring exchange-traded funds (ETFs) or mutual funds specialising in AI. These options offer flexibility and cater to different investment preferences, allowing investors to participate in the AI revolution according to their risk appetite and financial goals.

Summary of Best Five AI Stocks in India in 2024 to Watch

Serial No.	AI Stock Name	Market Capitalisation (Rs in crores)	1-Year Return	Category (Market-Cap)	Segment
1	Infosys	7,12,882	28.38%	Large	IT-Software
2	Tata Consultancy Services (TCS)	15,16, 991	28.35%	Large	IT-Software
3	Oracle financial services	92,174	166.51%	Large	IT-Software
4	HCL Technologies	4,23,793	40.49%	Large	IT-Software
5	L&T Technological Services Ltd	54,214	31.30%	Large	IT-Software

The top five AI-based stocks in India in 2024 are provided in detail below.

Infosys

The company exhibits strong long-term fundamental strength, with an impressive average Return on Equity (ROE) of 27.14%. This indicates the company’s ability to generate profits from shareholders’ equity. Additionally, healthy long-term growth is evident, as Net Sales have grown by an annual rate of 13.20%.

Moreover, the company’s low debt-to-equity ratio (average) of 0 times reflects a conservative approach to financing, which can be perceived as a strength. Notably, the stock is technically in a Mildly Bullish range, and the technical trend has shown improvement from Mildly Bearish on 27-Jun-24, generating 7.4% returns.

Furthermore, a confluence of technical indicators such as MACD, Bollinger Band, and KST all point towards a Bullish stance. This suggests that the stock has favourable momentum and potential for upward movement. A return on equity (ROE) of 29.8 is valued fairly, with a 7.8 price-to-book value, indicating a balanced valuation. The stock trades at a fair value compared to its average historical valuation.

In the past year, while the stock has generated a notable return of 26.74%, the company’s profits have risen by 8.9%. It is worth noting that the company’s price-earnings-to-growth (PEG) ratio is 3, which indicates that the stock may be overvalued relative to its expected future earnings growth.

Additionally, the high institutional holdings at 70.03% are worth considering, as institutional investors often have better capability and resources to analyse companies’ fundamentals than most retail investors. The recent increase in their stake by 0.55% over the previous quarter may signify growing confidence in the company’s prospects.

How’s Infosys working on AI?

Infosys Applied AI combines AI, analytics, and cloud to deliver efficient and scalable AI solutions for businesses. It highlights the capabilities of Infosys Applied AI, such as innovative applications, access to AI solutions, leveraging data estates, future-proofing and efficiently scaling AI enterprise-wide, and de-risking enterprise AI—the potential of generative AI to reinvent business, technology, and people.

The capability is made possible by Infosys Generative AI Labs, a component of Infosys Topaz. It achieves this by uniting industry solutions that are ready for use, a vast partner ecosystem, and responsible design frameworks.

This enables all individuals within and outside the organization to bring about change in the way they envision. Lastly, Infosys’ efforts in reskilling and platforms for employees to evolve into makers of AI to manage the talent risks posed by AI in the traditional workplace.

The Infosys Publisher AI Cloud offers data management, ad targeting, customer preference insights, and data monetization potential.

Tata Consultancy Services (TCS)

The company has consistently demonstrated strong long-term fundamental strength, with an impressive average Return on Equity (ROE) of 40.36%. This indicates the company’s efficient use of shareholder equity to generate profits.

In addition, the company has exhibited healthy long-term growth, with net sales growing at an annual rate of 10.46%. This sustained growth positively indicates the company’s performance and market position.

Furthermore, the company maintains a low debt-to-equity ratio, averaging 0 times. This signifies a healthy balance between its use of debt and equity to finance its operations.

The company has declared positive results for the last 6 consecutive quarters, demonstrating consistent performance and financial stability. With the highest operating cash flow in the financial year is at Rs 44,338.00 Crore, the company showcases strong operational efficiency and cash generation capabilities.

Moreover, the Return on Capital Employed (ROCE) is at its highest at 64.70%, illustrating the company’s effective capital utilisation. The company achieved its highest net sales of Rs 62,613.00 crore, indicating strong revenue generation and market demand for its products or services.

Technically, the stock is in a mildly bullish range, and multiple factors such as the MACD, Bollinger Band, and KST are bullish, indicating favourable technical indicators. With ROE of 51.5, the stock is fairly valued with a Price Book Value of 15.7, signifying an equitable valuation based on its financial performance.

Currently, the stock is trading at a fair value in line with its average historical valuations, reassuring potential investors regarding its pricing and investment potential. Over the past year, the stock has generated a return of 25.14%, while its profits have increased by 10.6%, resulting in a PEG ratio of 2.6. This indicates a balance between the stock’s price, earnings, and growth potential.

How’s TCS working on AI?

Tata Consultancy Services (TCS) has doubled its artificial intelligence (AI) and Generative AI (Gen AI) pipeline to USD 1.5 billion in the first quarter. CEO K Krithivasan mentioned that TCS executes around 270 AI projects, with many AI use cases going into production. TCS continues to see strong traction for its AI offerings, focusing on smaller-duration projects that are increasingly turning into longer engagements as the use cases mature. TCS is observing significant interest in our AI products in the market. TCS’s WisdomNext platform assists businesses in implementing Gen AI on a large scale.

Oracle Financial Services

The company has demonstrated high management efficiency with a remarkable Return on Equity (ROE) of 25.38%. Additionally, the company maintains a low Debt to Equity ratio (average) of 0 times, indicating a strong financial position.

However, the long-term growth prospects seem poor, as evidenced by the modest annual growth rates of Net Sales (5.15%) and Operating Profit (6.44%) over the last five years. The results for March 24 appear to be flat, suggesting stagnation in performance.

On a positive note, the stock is currently in a technically bullish range, and its technical trend has notably improved, leading to a substantial return of 25.45% since 11-Jun-24. These developments are anticipated to attract potential investors. Several technical indicators, including MACD, Bollinger Band, KST, DOW, and OBV, signal bullish sentiment.

Furthermore, the company’s ROE of 28.2 and a Price Book Value of 11.2 indicate a very expensive valuation. The stock is trading at a premium compared to its average historical valuations, potentially implying overvaluation that investors should consider.

Over the past year, the stock has generated a significant return of 178.07%, while its profits have risen by 22.9%. The company’s PEG ratio is 1.8.

The majority shareholders are also Promoters, and the stock has performed better than the market both in the long and near term. It has outperformed the market in the previous three years, one year, and three months by achieving impressive returns.

How’s Oracle Financial Services working on AI?

Oracle Financial Services recently introduced the Oracle Financial Services Compliance Agent, an AI-powered cloud service designed to help banks improve compliance and transaction monitoring. This service enables banks to conduct inexpensive scenario testing and adjust controls to identify fraudulent activities.

It assesses and mitigates risks associated with new banking products and high-risk typologies. It suggests that compliance agents can objectively evaluate new products’ anti-money laundering (AML) risk profile and proactively assess and diminish risks from high-risk typologies. Furthermore, it highlights the use of AI-powered analytics to make evidence-supported risk modeling decisions and provide evidence to model risk teams and regulators for monitoring transactions efficiently.

HCL Technologies

The company demonstrates robust long-term fundamental prowess, with an outstanding average Return on Equity (ROE) of 21.83%. This indicates its capacity to generate significant earnings from shareholders’ equity.

 The company has shown healthy long-term performance in terms of growth, with Net Sales experiencing a commendable annual growth rate of 12.71%. This indicates the company’s ability to increase its revenue over time consistently.

Furthermore, the company maintains a low debt-to-equity ratio, averaging 0 times. This suggests that the company has been prudent in managing its debt levels relative to its equity.

From a technical perspective, the stock is currently in a Mildly Bullish range, indicating a positive market sentiment towards it. Moreover, the technical trend has improved from Sideways on 03-Jul-24 and yielded a significant return of 5.18%.

Multiple technical indicators such as MACD, Bollinger Band, and KST point to a bullish outlook for the stock, further reinforcing its positive performance.

With ROE of 23, the stock is deemed to have a fair valuation, evidenced by a price-to-book value of 6. This suggests that the stock is priced reasonably relative to its book value. It’s important to highlight that the stock trades at a premium compared to its average historical valuations. This premium may indicate a potential overvaluation, which investors should consider.

Over the past year, the stock has demonstrated remarkable growth, generating a return of 40.30%. However, its profit growth has been comparatively modest, increasing by 5.7%. This reflects a PEG ratio of 4.6, suggesting the stock may be overvalued based on its expected growth.

Additionally, the stock enjoys high institutional holdings at 34.64%. This indicates that institutional investors typically possess greater resources and expertise and have a significant stake in the company.

How’s HCL Technology working on AI?

AI & Cloud Native Labs is HCL Tech’s strategic business unit that focuses on enabling modernisation and cloud journeys for enterprise clients. The lab takes a hands-on consultative approach to help future-proof businesses using modern software engineering practices.

It offers services for designing and enabling cloud-native journeys, showcasing possibilities, providing adoption and enablement support, and promoting cultural transformation. Additionally, the Gen AI Centers of Excellence is an extension of the AI & Cloud Native Labs that focuses on building strategic partnerships to deliver AI enablement. These services are designed to provide comprehensive solutions for cloud-native transformation needs.

L&T Technological Services Ltd

The company’s solid long-term fundamental strength is reflected in its impressive average Return on Equity (ROE) of 25.23%. The company has proven its capacity to produce favorable profits for its investors. Additionally, the company has shown robust long-term growth, with its operating profit increasing at an annual rate of 24.89%.

Moreover, the company maintains a low debt-to-equity ratio (average) of 0 times, indicating a conservative approach to financing its operations. This financial stability may bode well for the company’s long-term prospects.

From a technical analysis standpoint, the stock currently exhibits a sideways trend, suggesting a lack of clear price momentum. Furthermore, the technical trend has shifted from mildly bullish on 08-Jul-24 to -0.1% returns since then, indicating a deterioration in market sentiment.

The company’s Return on Equity (ROE) stands at 24.5, contributing to a very expensive valuation with a price-to-book value of 9.8. This suggests that the stock may be trading at a premium compared to its book value.

On the positive side, the stock trades at a discount relative to its average historical valuations, which could present an opportunity for value-oriented investors.

It’s worth noting that the stock has generated a return of 32.80% over the past year, while its profits have risen by 7.5%. However, the company’s PEG ratio is 5.5, indicating that the stock may be relatively expensive given its earnings growth.

Additionally, institutional investors have increased their participation, raising their stake by 0.64% over the previous quarter to 17.84%. Institutional investors are equipped with greater capability and resources to analyse a company’s fundamentals, which could signal confidence in the company’s long-term prospects.

How’s L&T Technological Services working on AI?

L&T Technology Services Limited plans to provide scalable AI solutions to enterprises globally and will participate in the NVIDIA GTC global AI conference. The company is committed to upskilling 1,000 engineers on NVIDIA software over the next three years.

The company aims to implement AI solutions across various sectors, including manufacturing, automotive, and healthcare, to enhance customer interaction and engagement through natural language processing, speech recognition, computer vision, and machine learning.

Frequently Asked Questions (FAQs)

What is Artificial Intelligence?

Artificial Intelligence (AI) is about creating computer systems and software that can do things that typically require human intelligence. These include understanding language, recognizing objects in images, and learning from experience.

What is AI designed for?

There are different types of AI. Some are designed for specific tasks, while others are more like human intelligence or even smarter.

How does AI work?

AI learns by examining many examples and identifying patterns. By learning from its mistakes, it can get better at tasks over time.

What are the current uses of AI in 2024?

AI is used in many things we use every day, like virtual assistants, movie recommendations, and even self-driving cars. It’s also being used in medicine, finance, and other industries to help with tasks that humans can do alone.

Can AI create jobs?

Yes, while AI can do some jobs that people used to do, it also creates new jobs. People still need to develop and oversee AI systems.

Are there any challenge/s with AI?

AI can raise concerns about privacy and fairness. Some people are working on making sure AI is used in a way that’s safe and fair for everyone.

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