India is rapidly adopting artificial intelligence as the world shifts towards smart practices and the adoption of AI across various markets. Considering the present applications and the rapidly evolving trend of AI, it is safe to say that advanced technologies such as this are the future.
With the idea of India being self-reliant becoming more prominent, companies are not only adopting AI but are also actively developing and improving it. To stay ahead of the curve, investing in artificial intelligence stocks for the long run is crucial. We can explore the sectors and companies that are trending for their work on AI in India.
What are artificial intelligence stocks in India?
Many companies in India have integrated teams specialising in AI applications to maximise the potential of the new technology. Investing in stocks of home-grown brands working toward research or application of AI can be extremely beneficial in the long run. Other sectors are also quick to adopt all applications that help them make day-to-day work more efficient, and this adoption can be cost-effective if it is assumed by an Indian tech company.
Also read: Stock options
The Indian AI sector: An overview
India has one of the highest AI talent bases, with employees growing every month. The AI market in India is projected to touch Rs. 1,42,000 crore by the year 2027, with a CAGR of 25–35%, according to a report by BCG and Nasscom. The demand for artificial intelligence is expected to grow at a CAGR of around 15% in India.
Trending artificial intelligence stocks in India
Here is a list of trending artificial intelligence stocks in India, updated until April 01, 2024. Please note that the list can fluctuate depending on breakthroughs and advancements in the tech sector.
- Bosch Ltd.
- Oracle Financial Services Software
- Tata Elxsi
- Persistent Systems
- Zensar Technologies
- Affle India
- L&T Technology Services
- Cyient Ltd.
- Infosys
- Happiest Minds Technologies Ltd.
Should you invest in artificial intelligence stocks?
AI is significantly shaping and altering the way we work, study, research, and live our lives. Its impact is pervasive, and it is here to stay. Organisations in India and worldwide are continually working on improving this technology to make it more efficient and accessible. Therefore, it is an ideal time to take the plunge and invest in AI. Investing in any technology is risky, but AI holds the key to the future.
What to consider when investing in AI stocks?
As with any sector, identifying the best AI stocks requires careful consideration. The AI sector, although promising, is relatively new and volatile. Here is a general guide on what to look for when analysing AI stocks:
- Financial health: Check the company’s balance sheets, debt levels, and revenue growth. AI firms with strong cash flows and manageable debt are typically better positioned for long-term growth.
- Technological advantage: Companies with a strong R&D foundation or proprietary AI technologies are more likely to lead the market.
- Valuation metrics: Examine the price-to-earnings (PE) ratio, dividend yields, and market capitalisation. High PE ratios might indicate investor confidence but can also be indicative of overvaluation.
- Competition: Assess how competitive the company is in its sector. AI is a crowded field, and only those with clear technological or market advantages will survive the test of time.
In addition to the above factors, it is important to assess an AI company on the following dimensions:
- Innovation track record: Look for companies consistently delivering breakthroughs in AI technology.
- Diverse applications: Companies working in multiple sectors, from healthcare to fintech, are less vulnerable to sector-specific downturns.
- Regulatory compliance: Make sure that the company is focused on building ethical, explainable, and fair AI solutions, as these factors determine long-term viability from a regulatory perspective.
- Strong partnerships: Companies collaborating with global tech leaders or governments often have an edge in scaling their AI technologies.
Also read: Common stocks
Trending AI shares in India 2024 – An overview
Here is an overview of five artificial intelligence stocks in the Indian market:
Bosch Ltd.
Bosch Ltd. provides technology and services related to automobiles, industrial technology, and consumer goods. It is a subsidiary of the German company Robert Bosch GmbH, and with its focus on innovation, it is poised to play an important role in the penetration and acceptance of AI in India.
Oracle Financial Services
Oracle Financial Services is a global company that provides technology solutions to help banks and other financial institutions. It helps its customers through improved financial services, build stronger economies, and prevent financial crime.
Tata Elxsi
Tata Elxsi provides engineering services and solutions across various industries, such as healthcare, broadcast, and communication. It helps companies design and develop products and systems.
Persistent Systems
Persistent Systems offers software development and support services. It assists companies in various sectors, such as healthcare, finance, and telecommunications, through digital transformation, cloud computing, cybersecurity, and enterprise mobility.
Zensar Technologies
Zensar Technologies is a global company that helps organisations with digital solutions and technology services. It works with entities from various industries to help them with their digital transformation efforts. The company was founded in 1963 and has partnered with several international firms.
Investing in artificial intelligence stocks
Here are some of the most popular methods of investing in artificial intelligence stocks in India.
- Direct investments
You can identify and research companies working on AI, such as those listed above, and directly invest in their stocks. This will make you a shareholder in the company, and you will receive direct returns on your investment. - Mutual funds
If you believe that direct investments are too risky, consider investing in a mutual fund that includes companies from the trending artificial intelligence stock lists. This way, you can invest in a pool of companies instead of making a larger investment in just one AI-focused stock. - Exchange Traded Funds
ETFs allow investors to invest in a diversified portfolio of stocks, bonds, and commodities as a cluster. In this case, you can choose a fund offering the best diverse artificial intelligence stocks. Unlike mutual funds, ETFs are sold and operated like individual stocks and are passively managed.
Also read: Small-cap stocks
Key factors to consider before investing in artificial intelligence stocks
Before investing in artificial intelligence stocks in India, it is essential to consider certain factors to make an informed decision. As most investments in this sector are long-term, it is crucial to evaluate the following elements:
Financial health: Check the company's financial history, cash flow statements, debt-to-equity ratios, profits, revenue, projections, and ongoing projects to understand its credibility and growth potential.
Ethical considerations: AI misuse is a prevalent issue, and there are rules against its usage worldwide. Therefore, you must scrutinise the applications of tech developed by the company and take ethical considerations into account.
Government regulations: Stay up-to-date with government regulations and rules worldwide to understand possible market fluctuations and ensure the company's AI applications comply with ongoing regulations.
Benefits of investing in artificial intelligence stocks
Investing in AI can offer several benefits, including growth potential, higher returns, and diversification. While investing in AI carries some risk, the current climate suggests that it is likely to see higher returns due to the increasing artificial intelligence stock prices and rapid advancements in technology.
Diversification is another advantage of investing in AI, as it allows investors to invest in a diversified portfolio of artificial intelligence stocks to reduce risks. Additionally, AI has applications in multiple sectors, including healthcare, education, design, and more, providing an opportunity to invest in the advancement of these sectors.
How to select artificial intelligence stocks for investing?
By considering the factors mentioned above, investors can make informed decisions about investing in artificial intelligence stocks. In addition to these factors, it is also important to look at a company's commitment to growth and results, its partnerships with other companies globally, and the scalability of its technology.
If a company is focused on achieving results and has a track record of making advancements in AI, it is likely to continue growing in the future. Conversely, if a company is only working on integrating AI in one sector, it may face scalability issues and may not experience growth beyond a certain point.
Also read: How to invest in US stocks from India
Conclusion
Investors should conduct thorough research to make informed decisions when investing in artificial intelligence stocks in India. Although there are risks associated with investing, the ongoing trends suggest that AI is here to stay, and the best way to move forward is to adopt and participate in this new era of artificial intelligence.
