H 1B shock and trade tariffs will force investors to reassess India’s growth story

H 1B shock and trade tariffs will force investors to reassess India’s growth story

The US presidential proclamation introducing a one-time $100,000 fee on new H-1B visa applications has jolted investors, especially when combined with looming trade tariffs, prompting reassessment of India’s growth premium. Analysts say the market may be derailed in the short-term on signals of heightened geopolitical and policy risk, with the US willing to weaponise both visas and trade, leaving India’s export engines exposed.

While ADRs of major Indian IT firms skid 4–7% intraday before partially recovering on Friday after the visa announcement came in, the implications of this could be much more than just the impact on IT stocks and could snowball into macro concerns.

Analysts warn the rupee could come under pressure if foreign institutional investors scale back exposure, particularly because the new fee applies only to new petitions and not renewals, but may still squeeze margins for export-focused sectors that depend on fresh H-1B deployments.

"Even though the impact is yet to be assessed to be quantified, higher visa costs could at the most delay projects or squeeze margins. Thus, leading to slow forex inflows , leaving the rupee vulnerable. At the same time, the risk of FIIs trimming down on Indian equity persists," said an analyst under anonymity, representing a top broking firm said an analyst at a top broking firm.

Pain beyond IT

Pain beyond IT / Market unease stems from the magnitude of the fee and its sudden announcement — though its scope is limited to new visa filings. This highlights India’s dependency on U.S. visa pathways for tech talent and goods exports as a negotiation lever.

“The H‑1B visa fee hike has caused significant unease in Indian markets, immediately impacting IT and tech stocks,” said Rajesh Palviya, SVP – Research at Axis Securities. “This comes even as India navigates the 50% tariff threat, with no resolution in sight. Together, these risks make it difficult for the market to accurately assess cross-border demand and margin outlooks. The impact could be beyond IT stocks.”

Tough tariff negotiations

Siddharth Oberoi, founder and CIO at Prudent Equity, added that the implications go beyond near-term earnings. “This will affect US-India relations and may complicate future trade negotiations. The $100,000 fee for new visas have the potential to directly affect Indian IT firms and U.S. multinationals in the short run, seeking to sponsor overseas talent — although current visa holders and renewals are exempt.”

Data shows nearly 70% of H‑1B beneficiaries are Indian nationals, with China accounting for about 10%, making the move appear particularly targeted. “It also puts pressure on the Indian government to bring H‑1B back to the negotiating table, where the US will likely hold the upper hand,” Oberoi said.

Ashish Nigam, President and CIO at Axis Capital, warned that the fallout could be broader than tariff concerns. “Goods exports account for just 2% of GDP, but software is nearly 10%. This isn’t only about IT firms; there are jobs at stake. Over the next six months, earnings pressure may mount, especially for firms heavily reliant on deploying new H-1B workers, given that applications filed after September 21 will incur the new fee It’s hard to predict though.”

Also read: IT stocks stare at fresh margin squeeze and de-rating on H-1B fee hike sparks

Sectors impacted immediately

Beyond IT, investors are watching pharma, auto components, and select industrial exporters reliant on US market access. “If project staffing or regulatory approvals are delayed, it affects not just onsite tech workers but any India-based exporter dependent on smooth US operations,” said an analyst at a domestic brokerage.

“This move is being seen by many as a non-tariff barrier on services — a direct cost on firms that rely on moving skilled talent overseas under new visa petitions,” Oberoi said. Till clarity emerges on both fronts, traders say markets will remain skittish. “This kind of twin uncertainty — visas on one side and tariffs on the other — creates a risk-off mood,” said Nigam.