Shares of major Indian IT companies fell on Monday following U.S. President Donald Trump’s introduction of a $100,000 fee on new H-1B visa applications. This move threatens to increase costs and slow revenue growth in their largest market.
The industry, which derives about 57% of its revenue from the U.S., has traditionally benefited from U.S. work visa programs and software and business service outsourcing—a contentious topic for American job-seekers facing competition from more affordable Indian labor.
The tech sub-index dropped nearly 3%, marking the largest decrease of the day, and also pulled the Nifty 50 benchmark down by 0.2%. India was the top recipient of H-1B visas last year, securing 71% of approved applications.
“Given the immediate pressure on margins in an already challenging market, we view this as negatively impacting the sector’s sentiment,” noted ICICI Direct, the online trading platform for ICICI Securities, in a client communication on Monday.
ICICI Securities projected that Trump’s decision could reduce profit margins by around 1 percentage point and decrease IT firms’ earnings by about 6%, assuming continued hiring of Indians under the program.
A ‘$100,000’ CURVEBALL
Trump’s overhaul of the H-1B program marks his administration’s most prominent attempt to revamp temporary employment visas.
Jefferies analysts described the move as a “$100,000 curveball” for the Indian IT sector, stating the industry has about four to five years to address the issue since the higher fees only apply to new applications.
Other analysts and industry experts anticipate Indian IT companies will lessen their H-1B visa dependency, opting for increased local hiring in the U.S. and recruiting in neighboring countries like Mexico and Canada.
The Indian IT industry organization Nasscom reported that H-1B visas granted to leading Indian and India-focused firms decreased to just over 10,000 in 2024 from nearly 15,000 in 2015. They expect Trump’s order to have minimal impact as Indian firms have significantly cut their H-1B visa reliance.
Mphasis led the losses on the tech sub-index on Monday with a 4.4% decline. Major IT companies TCS and Infosys dropped about 3% each, while Wipro saw a 2% fall.
Analysts at TD Cowen remarked that Trump’s order “is one of the last things the sector needed,” amid ongoing pressures from geopolitical and macroeconomic uncertainties and structural issues driven by GenAI.
This new challenge for the Indian IT sector emerges as it awaits clarity on a proposed 25% tax on outsourcing payments and grapples with weak revenue growth in its core U.S. market, as clients delay non-essential tech spending due to inflation and tariff uncertainties.
IT stocks have been the worst performers this year, falling 18% compared to a 7.1% gain in the Nifty 50 index.
