IT stocks fall for fifth day on US visa curbs; TCS, HCLTech, Wipro decline up to 2.5%
The shares of IT companies extended losses as investors weighed the impact of US President Donald Trump-led administration's recent announcements on H-1B visa.
The sharp fall in the share prices pushed the Nifty IT index down 1.25 percent to 34,557, as seen at 2.50 pm. The index has now fallen more than 6 percent over five consecutive sessions of recording losses so far.
Top IT losers today:
The shares of Tata Consultancy Services (TCS) were the top losers on the index, falling more than 2.5 percent to hit a 52-week low of Rs 2,956.90 apiece. Persistent Systems and HCL Tech shares fell nearly 2 percent each, while Wipro and Coforge shares were down more than 1 percent each.
Infosys, Mphasis and Tech Mahindra shares fell nearly 1 percent, while LTIMindtree shares were trading in the red with marginal losses.
What has Trump administration proposed?
President Donald Trump-led US administration has proposed to scrap the lottery system and replace it with wage-based selection process for allotting H-1B visas. The new proposal by the Department of Homeland Security aims at bringing in "a weighted selection process that would generally favour the allocation of H-1B visas to higher-skilled and higher-paid aliens, while maintaining the opportunity for employers to secure H-1B workers at all wage levels".
The new process, if finalised, would give heavier weight to applications by employers who pay high wages if annual requests for the visas exceed the statutory limit of 85,000, the notice said as quoted by Reuters. The move aims to better protect Americans from unfair wage competition from foreign workers, it said.
US to hike fee for fresh H-1B visa applications:
This comes after Trump recently announced that the US will introduce a $100,000 fee for fresh H-1B visa applications, an unprecedented increase from the earlier fee range of $215-$5,000, depending on the company size. This move had earlier sent the IT stocks to a spin, after a brief rise following US Federal Reserve's rate cut.
Notably, India was the largest beneficiary of H-1B visas last year, accounting for 71 percent of the approved beneficiaries, while China was a distant second at 11.7 percent, according to government data cited by Reuters.
What analysts say?
The proposal to scrap the lottery system and introduce wage-based selection process could hurt fresher hiring particularly, with startups and Indian IT firms seen as most impacted, says ICICI Securities. The brokerage believes Indian IT companies will partially mitigate it through offshore hiring, local hiring and near shoring.
"IT companies have reduced their dependence on H-1B visas in recent years via local hiring and nearshoring, and the moderation in fresh H-1B visas is a testimony to this. Expect further downtrend from CY25 base in the coming years, in our view. On-site presence is a client requirement, and we do not rule out negotiations by IT companies with clients to bear either partial or full incremental visa costs going forward. There is also a possibility of more offshoring hereon, as only mission critical resources will opt for H-1B. Our sensitivity analysis suggests 5.8%/8.4% worst case impact on earnings for mid-caps/large caps," said Elara Capital.
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(With inputs from Reuters)Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.