Indian Tech Stocks Lose $10 Billion in Market Value on H-1B Hike

(Bloomberg) —

Indian information technology companies took a hit Monday on concern that the hefty increase in US visa fees will pressure earnings at the nation’s leading outsourcing firms.

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The sector gauge dropped 3% in Mumbai, its worst day in over five months, erasing $10 billion in market value. Shares of Infosys Ltd., Tata Consultancy Services Ltd. and Tech Mahindra Ltd. were the biggest drags on the index.

President Donald Trump’s overhaul of the program, including a $100,000 fee for fresh applications, is the latest threat to India’s outsourcing companies whose operations have already hindered by muted demand. Companies including Tata Consultancy and Infosys derive a large chunk of revenue from the US, with overall exports exceeding $280 billion.

“This is likely to drive a change in the operating model, mainly toward higher off-shoring,” Jefferies Financial Group Inc. analysts Akshat Agarwal and Ayush Bansal wrote in a note. “Considering that the US government’s intent is to promote domestic employment, further measures to discourage outsourcing can’t be ruled out.”

India’s IT services sector has already taken a hit from disappointing earnings for the April-June quarter and layoff plans by bellwether TCS, as customers curtailed technology spending amid flaring trade tensions. The Nifty IT Index is down 18% this year, versus a 6.6% gain in the NSE Nifty 50 Index.

While most Indian software exporters have reduced their reliance on H-1B visas since Trump’s first term as president, the disruption to onsite operations poses a threat to near-term earnings. Jefferies estimates a 4% to 13% hit to consensus profit estimates.

Here’s what market watchers are saying:

Citi (strategists including Surendra Goyal)

• Within IT companies, HCL Technologies and Infosys said earlier this year that 80% and 60%-plus of their US workforce is visa independent; companies with less US exposure will obviously be relatively less impacted

• The impact will be largely visible starting in fiscal year 2027; some of it may be offset by higher outsourcing to India and lower outflow from education if Indian students refrain from studying abroad

JPMorgan (Toshi Jain)

• The relative price of hiring workers on H1-B visas is expected to increase meaningfully

• This is likely to force employers to (i) increase the ratio of off-shoring/near-shoring to onshoring and (ii) substitute H1B workers with local workers for onshored work