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Top 3 India Outsourcing Stocks


As the recovery has gained momentum, businesses have started spending again and returned to growth mode. While it’s true companies may not be hiring more workers just yet, they are indeed spending their cash on ways to improve efficiency and profits such as upgrading IT systems or reducing tech support costs. That makes tech stocks in India a great investment right now.

During the tech boom of the ‘90s, the Indian software industry grew from a mere $150 million business at the dawn of the decade to a staggering $5.7 billion (including over $4 billion worth of software exports) in 2000. And now? The software industry exports mover $50 billion a year and is one of the tech centers of the world. Though agriculture and basic industry are larger portions of India’s GDP, no other group of businesses have performed so well in the last few decades as the nation’s tech sector.

What’s more, the growth shows no sign of slowing. India’s software and service exports in 2009 grew by more than 15% even in a tough economic climate. With an average annual GDP growth rate of 5.8% for the past two decades, the Indian economy is among the fastest growing in the world and continues to provide great conditions for tech stocks.

To help you capitalize on this growth of tech in India, here are my top 3 Indian tech stocks:

India’s Patni Computer Systems Ltd. (PTI) provides IT outsourcing services to companies worldwide. The company specializes in application development and maintenance, business process outsourcing, enterprise system management, quality assurance and software implementation. Patni primarily serves companies in the insurance, financial services, manufacturing and telecommunications industries. The company also provides product engineering services in consumer electronics, data storage networks, industrial automation, medical electronics and enterprise software. Patni has been on a tear for the last four quarters, topping earnings expectations each quarter by more than 15%. PTI is a great buy below $24.

Cognizant Tech Solutions (CTSH) is based in New Jersey, but don’t let the headquarters of this blue chip tech stock fool you. CTSH is a leading IT firm that provides a wide array of data and software services to businesses around the world that specializing in outsourcing.. It offers its services to all manner of businesses, including financial services, health care, manufacturing and logistics, retail, telecommunications and the media. The company enjoys big margins because most of Cognizant Tech’s software development centers and employees are located in India, although it has other development facilities in Argentina, China and Hungary. This allows CTSH to sell its ware to every corner of the globe. The numbers show how powerful this business model is. Cognizant posted very impressive profit and revenue for the fourth quarter, and raised guidance for 2010 above Wall Street estimates. Specifically, CTSH earned $144 million, or 47 cents per share on the quarter. That’s up 28% from $112.3 million or 38 cents per share a year earlier. Revenue also jumped 20 percent to $902.7 million. CTSH is a great buy below $55.

India’s Wipro Ltd. (WIT) is one of the leading providers of system integration and help desk services in the world. It also provides outsourced research and development, infrastructure outsourcing and business consulting services to companies in the West. Wipro clients come from a range of industries including energy and utilities, retail, financial services, the media and healthcare.  In its latest quarter, the company’s sales rose 5.9% to $1.51 billion compared with $1.43 billion in the same quarter a year ago.  During the same period, Wipro’s net earnings rose 19% to $261.1 million compared with $219.42 million. These earnings were 20% better than analysts’ consensus estimates. For its current quarter, I expect 19.7% sales growth and 41.7% earnings growth. The stock has a strong earnings surprise history and is a great buy below $25.

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