Best Smallcap IT Stocks List in India

Technology has impacted today’s world in a big way, and it is hard to think of something that has not been impacted by the technological revolution. IT companies such as Infosys, TCS, etc. are well-known but do you know there are several smallcap firms in the IT sector that have the potential for long-term success?

In this blog, we will provide an overview of the leading smallcap IT stocks, factors to consider before investing, benefits of investing in small cap IT stocks and the future of the IT sector in India.

What are IT Sector Stocks?

Information technology, or IT, is a sector that makes significant contributions to the Indian economy. Through their software, hardware, and networking systems, these companies assist other enterprises, the government, and consumers with state-of-the-art technology-based products and services.  These companies also offer cyber security solutions to shield networks from threats. Companies in this sector employ skilled workers and often operate internationally.

List of Small Cap IT Stocks

The list of smallcap IT stocks is as follows:

1. Firstsource Solutions Limited
2. Affle India Limited
3. Cyient Limited
4. Newgen Software Technologies Limited
5. BLS International Services
6. Sonata Software Limited
7. eClerx Services Limited

Market Information 

Company	Current Market Price (₹)	Market Capitalization (in ₹ crores)	52-Week High (₹)	52-Week Low (₹)
Firstsource Solutions Ltd.	367	25,937	392	172
Affle India Ltd.	1,828	25,665	1,884	998
Cyient Ltd.	2,056	22,818	2,459	1,652
Newgen Software Technologies Ltd.	1,499	21,033	1,548	626
BLS International Ltd.	481	19,815	495	263
Sonata Software Ltd.	665	18,636	870	469
eClerx Services Ltd.	3,723	18,254	3,877	2,114

Overview of Top Small Cap IT Stocks in India

An overview of the smallcap IT stocks in India is given below:

1. Firstsource Solutions Limited

ICICI Infotech Upstream, a subsidiary of ICICI Bank Limited, was established in 2001 with a focus on business process outsourcing. It changed its name to Firstsource Solutions Limited the very next year, in 2006. The business specializes in customer experience management solutions, data-driven insights, and process management services. To raise capital for expansion, the company launched an IPO in 2007. It was acquired by the RP Sanjiv Goenka Group in 2012 and expanded its global footprint across the globe. It acquired various brands, including ISGN Solutions, Sourcepoint, and PatientMatters, which helped it increase its healthcare, mortgage, and financial services verticals. Currently, it operates in several nations, including the US, UK, Europe, and others. The company’s headquarters is in Mumbai. 

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
93.12%	126.10%	786.29%

2. Affle India Limited

Anuj Khanna launched Affle in Singapore with an initial emphasis on mobile ad tech solutions. From 2010 to 2015, the business expanded its activities throughout the world, especially in South Asia. Later, in 2018, it moved its headquarters from Singapore to India. Through an initial public offering, it was listed on the Indian Stock Exchange later in 2020. In addition to growing its footprint in developing regions, including the Middle East and Latin America, the company recently established machine learning and artificial intelligence capabilities and was included in the Deloitte Technology Fast 50. The company’s headquarters is in Gurugram. 

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
41.79%	65.43%	518.51%

3. Cyient Limited

Originally known as Infotech Enterprises Ltd., Cyient Limited was established in 1991 by B.V.R. Mohan Reddy. Later, they created several distribution hubs across the US and Europe as part of their expansion. The business rebranded itself as Cyient Ltd. in 2014. Additionally, it is developing manufacturing facilities to cater to aerospace, defence semiconductors, and other industries and has acquired companies, including Certon Software, Blom Aeroflims, and Ansem N.V. The company’s headquarters is in Hyderabad.

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
-10.40%	105.96%	378.34%

4. Newgen Software Technologies Limited

T.S. Varadarajan and Diwakar Nigam founded the business in 1992 with an emphasis on enterprise software solutions. The company began international operations by setting up centers in the US, UK, and Asia Pacific Region, and between 2000 and 2010, it expanded its product line to include an enterprise document management system (EDMS) and Business Process Management (BPM) platform. According to Gartner and Forrester surveys, the company was acknowledged as a top provider of BPM and ECM in 2015. In 2018, Newgen Software Technologies launched its initial public offering (IPO) and was listed on the Indian Stock Exchange. The headquarters are located in New Delhi.

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
104.78%	395.90%	1,392.11%

5. BLS International Services Limited

The company was established in 2005 and offers e-governance, attestation, biometrics, e-visa, and retail services. The company has global operations as a result of the numerous government contracts it has obtained from various embassies, Diplomatic Missions and Consulates. In 2016, the company was listed on the Indian Stock Exchange. With its headquarters located in New Delhi, BLS International Services Limited presently operates through a network of more than 50,000 centers in over 66 countries, including the US, UK, Canada, and others. 

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
56.97%	898.24%	2,902.49%

6. Sonata Software Limited

A prominent participant in the Indian IT industry, Sonata Software Limited was founded in 1986 and offers enterprise solutions and IT consulting. It was once a division of Indian Organic Chemicals. The company itself went public on the Indian Stock Exchange later in 1994. Sonata Software has purchased several businesses that focus on customer management systems, cloud services, and data analytics. The business operates in 30 countries, including those in the Middle East and Asia Pacific. The company recently introduced cloud platforms and digital engineering services. The company’s headquarters is in Mumbai. 

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
-15.21%	108.79%	477.51%

7. eClerx Services Limited

Anjan Malik and PD Mundhra established the business in 2000. At first, the company concentrated on offering analytics and data management services, particularly to financial organizations. eClerx Services Limited was listed on the Indian Stock Exchange in 2007. Later, in 2010, the business began offering telecommunications, digital marketing, and e-commerce services in addition to expanding its product line. To strengthen its digital marketing vertical, the company purchased the US tech startup Agilyst in 2012 and CLX Europe in 2015. The company’s headquarters is in Mumbai. 

Know the Returns:

1Y Return (%)	3Y Return (%)	5Y Return (%)
47.93%	148.30%	936.14%

Key Performance Indicators (KPIs) 

Company	Operating Profit Margin (%)	Net Profit Margin (%)	ROE (%)	ROCE (%)	Current Ratio
Firstsource Solutions Limited	11.56	8.12	13.91	16.50	0.94
Affle India Limited	18.75	16.13	11.90	13.09	3.07
Cyient Limited	15.41	9.83	16.03	20.61	2.15
Newgen Software Technologies Limited	24.79	20.22	20.56	23.59	3.44
BLS International Services	21.15	19.41	25.91	24.09	7.70
Sonata Software Limited	8.37	3.58	21.93	35.07	0.99
eClerx Services Limited	24.42	17.49	22.75	28.00	5.17

Benefit of Investing in IT Stocks

Including small IT stocks in your portfolio will be beneficial for you for the below-mentioned reasons:

• Innovative Technology – These IT firms mostly concentrate on emerging technologies like cloud computing and artificial intelligence. As a result, having them in your portfolio increases your chances of earning substantial returns.
• Diversification – IT firms typically serve a variety of industries, such as pharmaceutical, healthcare, finance, etc., giving them protection against downturns in any one of those sectors. 
• Global Exposure – Businesses in the IT sector usually operate globally and cater to customers from various nations.

Factors to Be Considered Before Investing in IT Stocks

There are multiple factors one should consider before investing in IT stocks:

• Technology – Only businesses that make significant investments in the research and development of new goods and services should be taken into consideration, as the company that consistently develops cutting-edge technology will outperform its competitors in the long run.
• Financial Stability – Review and analyze the financial statements of the company to make informed investment decisions. 
• Client Base – The business should develop services to cater to a diverse customer base.
• Global Economic Conditions – Macroeconomic variables like interest rates and currency exchange rates have a direct impact on the IT sector. Therefore, before investing in this industry, one should also have this in mind. 

Future of IT Sector in India

The Indian economy places a high value on the information and technology sector. This sector’s exports account for a significant amount of the nation’s foreign exchange earnings. In 2020, this industry accounted for about 7.7% of the nation’s GDP; by 2024, that percentage will increase to 10%. According to a recent NASSCOM analysis, this industry is expected to generate $350 billion in sales by 2026. As a result, this industry has a very bright future in India, and the businesses involved in this sector might prosper in the long run.

Conclusion

To sum up, the Indian IT sector substantially contributes to the country’s GDP. There are a lot of growth opportunities in this industry, but there are some risks. Due to the ever-changing nature of the technology industry, businesses in this sector must continue to develop the latest technologies and provide superior services than their competitors. Before making any investing decisions, speak with your financial advisor.

Frequently Asked Questions (FAQs)