Shares of Indian IT firms fell sharply on Monday with the Nifty IT index losing about ₹83,000 crore in market capitalisation after the latest H-1B visa policy changes by U.S. President Donald Trump rattled sentiment. The sell-off in the IT pack also dragged down the broader market with the benchmark Sensex falling 466.26 points or 0.56% to settle at 82,159.97, and the Nifty slipping 124.70 points or 0.49% to 25,202.35.
Shares of small-cap and midcap IT stocks such as Infobeans Technologies and Hexaware Technologies tumbled 7-8%, while Mphasis, LTIMindtree, Coforge and Persistent closed 4-5% lower. Heavyweights such as TCS, Infosys, Wipro and HCL Tech fell 2-3% on Monday.
The sell-off in the IT pack came after Trump signed an executive order hiking the H-1B visa fee from $1,000 to $100,000 per applicant, a hundredfold increase, for fresh applications. This move is likely to impact the earnings of firms that derive a large chunk of their revenue from the US market.
“This (H-1B fees hike) rattled sentiment in a sector that had only recently shown signs of recovery. IT services are seeing slower growth for now as companies spend more on AI hardware, but demand is expected to pick up once technology stabilises and adoption becomes wider,” said Siddhartha Khemka - Head of Research, Wealth Management, Motilal Oswal Financial Services.
Looking ahead, Khemka added that focus will be on Commerce Minister Piyush Goyal’s visit to the U.S. on September 22 for trade deal negotiations—the first since the Trump administration imposed 50% tariffs.
Brokerage firm Jefferies expects a talent supply crunch to drive up onsite wages (due to the H-1B fee hike), which could drag down profits by 4% to 13%, adding that growth may also slow amidst operating model shifts, macro pressures and AI risk. Among the large-cap stocks, Jefferies sees TCS and Infosys to be well placed, while Coforge is best placed among the mid-cap names.
Nomura said that in a worst-case scenario, it expects an impact between 10 basis points to 100 basis points on the company's margins for the entire coverage universe.
The Indian technology services outsourcing sector, valued at $283 billion and including companies such as Tata Consultancy Services, Infosys, HCLTech and Wipro, derives more than half of their earnings from the United States, whilst maintaining its primary workforce in India. Firms such as Mphasis generate more than 81% of their revenue from the US market while for HCL Tech, this number is around 66%. Wipro sees nearly 63% of revenue from the US market, Coforge 56% and Tech Mahindra about 51%.
BofA Securities said that the new H-1B visa fees norms pose a gross pre-mitigation Earnings per Share (EPS) risk of 7% to 17% over a three-year period. Companies now have a clear 12 months to plan and kick in mitigations like offshoring and near-shoring, and the risks can completely nullify the impact over the next three to five years, BofA Securities said, adding that Tech Mahindra is the most exposed among these names.