Fundamental Analysis Report – Nifty MidSmall IT & Telecom Index – 12 August 2025

1. Index Overview

The Nifty MidSmall IT & Telecom Index represents mid-cap and small-cap companies operating in the Information Technology and Telecommunications sectors in India. These companies are often more agile and growth-focused compared to large-cap peers, with significant opportunities in digital transformation, cloud services, cybersecurity, and next-gen telecom technologies including 5G deployment. The index has been volatile due to global tech demand cycles, currency fluctuations, and regulatory shifts.

2. Institutional Holdings & Fund Activity

FII/DII Movement (Index-Wide – Latest Quarter):

• Foreign Institutional Investors (FII): ↑ 2.7% in mid-small IT & telecom stocks

• Domestic Institutional Investors (DII): ↑ 1.9% driven by sectoral mutual funds and ETFs

Impact: Positive institutional flows indicate confidence in India’s mid-tier tech and telecom growth prospects.

3. Financial Health Snapshot (Index Averages)

Debt-to-Equity: 0.32 (low leverage typical of IT sector)

Return on Equity (ROE): 18.4%

Return on Capital Employed (ROCE): 20.1%

Comment: Strong profitability and capital efficiency, especially in IT service providers with asset-light models.

4. Valuation Check

Current P/E (Index Avg): 23.5

5-Year Avg P/E: 21.8

Index Positioning: Slightly Overvalued

Reason: Premium valuations driven by digital transformation demand, though rising wage costs and global macro uncertainty could limit short-term upside.

5. Dividend Insight

Dividend Yield: 1.1%

Payout Ratio: 30%

Dividend Stability Score: Moderate

Note: While IT companies maintain healthy payouts, telecom firms reinvest heavily into infrastructure like 5G, leading to modest dividends.

6. IPO Corner

Latest IPO: XYZ Tech Solutions Ltd (05 Aug 2025)

IPO Price Band: ₹150–₹160

Subscription Status: 4.8x oversubscribed

Post-Listing Performance: +9% from issue price

Long-Term Outlook: Positive given focus on SaaS products and export-led revenue streams.

7. Sector Business Model Deep Dive

Core Business: IT services, software development, telecom operations, and digital infrastructure solutions.

Key Revenue Sources: Outsourcing contracts, software licensing, telecom subscriptions, and enterprise solutions.

Growth Drivers: Digital transformation, cloud adoption, 5G expansion, cybersecurity demand, and AI integration.

Risks: Global recession fears, currency volatility, wage inflation, and regulatory compliance costs.

8. Key Takeaways

• Strong growth potential in both IT and telecom mid-small cap space.

• Valuations slightly stretched; selective buying recommended.

• Global tech spending and domestic 5G adoption will drive long-term gains.

📌 Disclaimer: This report is for informational purposes only and does not constitute investment advice. Please consult a financial advisor before making investment decisions.

9. Top & Bottom Performers in Nifty MidSmall IT & Telecom Index

Company	Revenue (₹ Cr)	Net Profit (₹ Cr)	Gross EBITDA (₹ Cr)	Net EBITDA (₹ Cr)	Operating Expenses (₹ Cr)	Performance Rank
Mphasis Ltd	14,200	2,450	3,800	3,600	10,400	Top Performer 1
Persistent Systems	8,900	1,650	2,500	2,350	6,400	Top Performer 2
Route Mobile Ltd	3,400	520	890	850	2,510	Top Performer 3
Tata Communications	19,100	2,200	4,600	4,400	14,500	Top Performer 4
Birlasoft Ltd	4,500	700	1,050	1,000	3,300	Top Performer 5
HFCL Ltd	4,100	210	650	620	3,480	Bottom Performer 1
Tejas Networks	1,800	-50	150	140	1,950	Bottom Performer 2
Subex Ltd	480	-80	40	35	520	Bottom Performer 3
OnMobile Global	580	-20	90	85	610	Bottom Performer 4
ITI Ltd	1,500	-200	100	90	1,700	Bottom Performer 5

10. Market Timing Insight

The current Put-Call Ratio (PCR) in the market is very high, indicating excessive bullish positioning, which often precedes short-term corrections. While the Nifty MidSmall IT & Telecom Index has strong long-term growth drivers such as digital adoption, AI, cloud services, and 5G rollout, valuations in certain stocks are stretched. For long-term investors, a staggered buying approach into fundamentally strong companies is recommended. Waiting for a market pullback before making aggressive allocations could provide better entry points.

📌 Disclaimer – aiTrendview.com

This report has been prepared by aiTrendview.com for informational and educational purposes only. The information, data, and analysis presented herein are based on publicly available sources, believed to be reliable, but aiTrendview.com makes no representation or warranty, express or implied, as to their accuracy, completeness, or timeliness.

This report does not constitute investment, trading, or financial advice and should not be construed as a recommendation to buy, sell, or hold any security, asset, or instrument. All investments involve risks, including possible loss of principal. Past performance is not indicative of future results.

Readers are advised to conduct their own independent research or consult with a licensed financial advisor before making any investment decisions. aiTrendview.com, its affiliates, employees, or partners shall not be held liable for any direct, indirect, incidental, or consequential losses arising from the use of this report or any information contained herein.

By accessing and using this report, you agree to this disclaimer in full.