Mutual Funds Seen Trimming Tech Bets as Visa Fees, Wage Pressures Darken Outlook

The latest H-1B overhaul by US President Donald Trump, coupled with pending proposals on wage floors and outsourcing taxes, risks accelerating this underweight trend.

Mutual funds are likely to pare back exposure to technology stocks as macro and regulatory headwinds intensify, eroding growth visibility and margin stability. Technology’s weight in equity fund portfolios of the top 20 fund houses has already slipped from 9.6% in January to 7.8% in July, with only a marginal rebound to 7.9% in August, data from Motilal Oswal’s fund tracker shows. The latest H-1B overhaul by US President Donald Trump, coupled with pending proposals on wage floors and outsourcing taxes, risks accelerating this underweight trend.

Also read: Mutual Funds Seen Trimming Tech Bets as Visa Fees, Wage Pressures Darken Outlook

IT stocks have lagged this year, with index heavyweights Infosys, TCS and HCL Tech down 20–25% year-to-date, while mid-caps like Persistent Systems and Coforge have fallen more than 10%. The Nifty IT index slid another 3% in today’s trade. Analysts caution that multiple headwinds—from weak demand and uncertain benefits of AI adoption to higher labour and immigration costs—are capping near-term upside for the sector.

On September 19, President Trump signed a proclamation imposing a $100,000 fee per H-1B petition, widely seen as pricing out Indian talent and closing a key labour channel. In a subsequent clarification, the White House said the payment would be a one-time fee, applicable only to new applications from the next lottery cycle (March–April 2026), and not on renewals. The proclamation is in effect for 12 months but may be extended.

Analysts told Moneycontrol that further challenges could emerge in the future. “In a worst-case scenario, if companies simply pay the additional $100,000 fee, the effect on FY27 EPS could range from 2–6%, without any adjustments to the labor supply chain,” Ankur Rudra, JPMorgan’s Head of APAC Telecom & Internet, noted in a client briefing. “However, in reality, firms are more likely to accelerate near-shoring to countries like Canada and Mexico, expand offshore operations, and rely more on local graduates to mitigate the impact.”

India’s IT sector has already seen a decline in its dependence on H-1B visas over recent years. Moneycontrol previously reported that the top five IT companies reduced their H-1B usage from 29,200 in FY20 to an annualized 15,600 in FY25, a decrease of 46%. Localization rates, which currently range between 50–80% at major firms, are projected to rise to 90–95% within the next two to three years. Experts also anticipate that companies will strengthen onsite staffing structures and “rebadge” client employees to better manage delivery costs.

Also read: US H-1B visa clarification eases uncertainty, India's IT industry body says

On September 22, Nifty IT index was under pressure, trading around 3 percent lower at Rs 35,442.