The H-1B setback weighed on listed shares of Indian large and midcap IT companies, falling between 2-5 percent to take the Nifty IT index down by 3 percent on September 22, as investors turned cautious on likely impact on business and profitability, awaiting further clarity.
The market fall wiped out roughly $10 billion in market capitalisation of IT shares.
Nine of Nifty IT's 10 constituents ended in the red, and the selling pressure reflected in the benchmark indices Nifty and Sensex too, which ended lower by around 0.50 percent. So far this year, the Nifty IT index is down 18 percent.
Among the top losers on Nifty 50 index were the IT names, led by TechM, Wipro, Infosys, HCLTech and TCS, with Tech Mahindra worst hit, down around 3 percent.
IT Stocks Sell Off
The selling pressure has been broad-based, weighing down even companies such as Firstsource Solutions that have clarified that there no impact of the visa curbs on their business. The company said it has strong local hiring strategy and a globally distributed model which insulates it from changes in immigration regulations, yet the shares of Firstsource are down over 1.5 percent. Persistent Systems too has said it does not see any material impact from the order, yet the shares are sharply lower in the trading session.
"Based on our current assessment, we hereby wish to inform that we do not expect any significant impact of the above Executive Order on our operations or financials. We will continue to monitor the developments in this regard closely...," Persistent Systems said in a statement on September 22.
Brokerage View
JPMorgan in a note to its clients has said that the visa rules could increase prevailing H-1B wages, which could squeeze margins. “In the worst case, if companies simply choose to pay the additional $100,000 fee, the impact could be 2–6% on FY27 EPS with no change in the labour supply chain,” JPMorgan said.
Infosys and HCLTech have said that over 60% and 80%- of their US business is independent on visa approvals, a note by Citi said, and the business impact could be seen from FY27 onwards.
Jefferies has said that a shortage of talent could push up onsite wages and hurt the profitability of Indian IT companies, or even slow down growth amid macro pressures and AI-related risks.
Visa Woes
US President Trump had on Saturday overhauled the of visa program by mandating a $100,000 fee for new applications, a move that will impact leading outsourcing companies which rely on American market for a large share of their revenue.
Read More: Will the Indian IT sector crumble under the new H1B visa guidelines?
Factors at Play
The sector is already reeling under sluggish earnings during the June quarter as well as a major layoff announced by TCS, amid Trump's tariffs and US businesses cutting back on IT spend on slowdown worries, even as the US stock market has been hitting record highs.
The move is expected to restructure the businesses of IT companies to a costlier onshore model or cheaper program with much of the work being done outside the US, said some IT analysts.
Trade Talks
The latest move by the US President comes just days after his call with PM Modi during which both nations agreed on the ongoing strategic and comprehensive nature of the partnership. With this latest development on H-1B visas, services exports too have been pulled into trade-related tensions between both counties. Commerce Minister Piyush Goyal is expected to be in the US this week with a delegation to continue trade talks in an effort to achieve an early agreement.
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