If you believed that Indian IT stocks were cruising effortlessly, reconsider. On Monday, September 22, international news reverberated through Dalal Street as US President Donald Trump revealed an astonishing rise in H-1B visa fees—from $1,000 to an astonishing $100,000 for each applicant. The announcement sparked a swift decline in IT stocks, erasing billions in market value in just hours.
But here’s the key question: Should investors view this decline as a warning sign… or a prime buying chance? Let’s analyze it in stages
What Caused the Decline in IT Stocks?
Indian IT firms, including Infosys, TCS, Wipro, Tech Mahindra, HCL Tech, and Mphasis, have historically depended on the H-1B visa program to dispatch skilled workers to the US. Trump’s recent announcement, however, has changed the narrative.
The US government has effectively boosted the expense of exporting tech workers by raising the visa fee to $100,000 per year—an increase of 100 times from the previous $1,000. Investors were anxious, and it was evident in the markets:
- Nifty IT dropped more than 3.5% during the day.
- Tech Mahindra fell by 5.8%.
- Mphasis and Persistent Systems dropped by more than 5%.
- Infosys, TCS, Wipro, HCL Tech, and LTIMindtree dropped by 3–5% each.
- Even somewhat sheltered companies such as Oracle Financial Services decreased by 1.4%
Why Is This So Important for Indian IT Companies?
Consider the H-1B program as the essential support for international IT firms working in the US. It enables companies to deploy skilled software engineers, project managers, and consultants to collaborate directly with clients overseas.
Currently, if every visa is priced at $100,000 annually, the financial dynamics alter significantly. It’s akin to being unexpectedly asked to pay luxury vehicle rates for a regular cab ride—you’d reconsider before getting in
What is the Actual Exposure of Indian IT Firms?
There’s a positive aspect: Indian IT firms are less reliant on H-1B visas than they used to be. As per analysts from MOSL:
- Just 20% of IT workers from India are present on-site in the United States.
- Among them, only 20–30% possess H-1B visas.
- This indicates that only 3–5% of a standard IT vendor’s staff is directly impacted.
In the last ten years, firms such as Infosys and TCS have localized their labor force, employing a greater number of US citizens and permanent residents to lessen reliance on visas.
Indeed, the headline may seem frightening, but the real exposure? Not as disastrous as it seems
Big Tech vs Indian IT: Who Faces Greater Impact?
Here’s a fascinating development: the companies experiencing the most significant impact may not even be the major Indian IT firms. Reports indicate that tech giants in the US, such as Google, Amazon, Microsoft, and Meta, submit a significantly higher proportion of H-1B applications than Infosys or Wipro do.
In other words, the tempest might impact Silicon Valley more severely than Bengaluru
What Approaches Can Indian IT Firms Implement Currently?
Indian IT companies are currently developing innovative methods to adjust. This is what analysts anticipate:
- Transition to Offshore Delivery – Rather than dispatching engineers to the location, an increased amount of work can be conducted remotely from India. This not only eliminates visa expenses but also enhances profit margins.
- Domestic Recruitment in the US – Numerous companies are increasing their hiring within client regions, facilitating smoother processes without visa challenges.
- Subcontracting Models – Collaborating with local suppliers aids companies in minimizing reliance on visas.
- Automation and AI-powered Delivery – By utilizing sophisticated tools, organizations can reduce on-site labor requirements
Will Profit Margins Suffer?
Brokerages continue to be split.
- MOSL thinks the long-term effects may be constrained and might even be beneficial as offshore operations typically offer greater profit margins.
- JM Financial forecasts that extensive reliance on local hiring by companies may result in a margin decrease of 15–50 basis points (bps). Nonetheless, in the more probable case of increased offshoring, this effect could be completely countered.
Thus, in terms of finance, the worst possible outcome may not be as frightening as the news implies
Legal Hurdles Ahead: Will the Decree Hold?
We shouldn’t overlook that this executive order will probably encounter legal disputes in US courts. Comparable immigration initiatives in the past have frequently been obstructed, diluted, or postponed.
This suggests that the increase in fees may not even occur in the drastic manner we observe today. Investors who sold in a panic may end up regretting their decision
Investor Mood: Purchase, Dispose, or Maintain?
As valuations in the IT sector appear more appealing now, analysts recommend caution but not hopelessness.
- MOSL favors HCL Technologies and Tech Mahindra within large-cap stocks.
- Tech Mahindra is undergoing a transformation led by its leadership, particularly in the BFSI sector.
- HCL Tech provides a varied portfolio that demonstrates strength across different cycles.
- Coforge and Hexaware are prominent among mid-caps due to their robust presence in cost-sensitive sectors.
The main point? Targeted purchasing can be rational, particularly if you’re committed for the long term
Is It Wise to Purchase IT Stocks Following the Decline?
Consider this perspective: Immediate discomfort, future benefit.
Indeed, the abrupt increase in visa fees has unsettled markets. However, Indian IT companies have spent the previous ten years getting ready for these situations. Their emphasis on localization, digital distribution, and international recruitment means they rely significantly less on H-1B visas than before.
The transition to offshore models could potentially enhance profitability in the medium term. For investors with a long-term perspective, these downturns could be the opportunities they’ve been anticipating
Concluding Reflections
The H-1B visa fee increase by the Trump administration is a noteworthy, attention-catching action—but it isn’t the doom for Indian IT shares that many worry about. Indeed, short-term volatility will persist, yet the fundamentals of Infosys, TCS, Wipro, HCL Tech, and others continue to be robust.
This disruption may actually speed up the transition to offshore delivery, the use of AI, and hiring locally—resulting in increased resilience for Indian IT companies over time.
For investors, the important thing is to avoid panicking with the crowd. Instead, seek high-quality companies that can endure temporary challenges and provide consistent growth in the digital-centric economy.
Read More: CG Power Stock: Still Room to Run After Big Gains?
In summary
In conclusion, the market’s response to the increase in H-1B visa fees appears to be more of an emotional response than a logical adjustment. Indian IT companies might see a slight drop in overall revenue, but enhanced margins and localization tactics could offset the losses.
Therefore, is it advisable to purchase? If you have faith in the long-term narrative of Indian IT, then indeed—this decline could be the chance you’ve been anticipating
