Trump's H-1B Visa Fee Hike Hits Indian IT Stocks Hard
The recent announcement by US President Donald Trump regarding a steep hike in H-1B visa fees has sent shockwaves through India's IT sector. Stocks fell sharply by 2-5% on Monday, with significant losses recorded by major companies. The new visa fee of $100,000 represents a dramatic increase from the previous range of $1,710 to $6,460. This unexpected move resulted in a staggering loss of nearly Rs 83,000 crore in market capitalization from the Nifty IT index, which fell around 3% for the day.
Major players in the IT sector, including TCS, Infosys, Wipro, and HCL Tech, ended the day lower by 2-3%, while other companies like Mphasis and LTIMindtree saw declines of 4-5%. The overall market was also weak, with the Sensex slipping 466 points to close at 82,159.97. However, it was the IT sector that bore the brunt of investor panic as experts began assessing the implications of Trump's decision on India's $283 billion outsourcing industry.
Industry analysts have expressed concerns that the steep increase in visa costs could disrupt the long-standing offshoring model that many Indian firms rely on. With on-site deployment now becoming significantly more expensive, companies might shift towards domestic delivery centers or nearshore options in countries like Mexico, Canada, and Eastern Europe. This pivot could alter the competitive landscape for Indian IT firms.
Ponmudi R, CEO of Enrich Money, labeled the fee hike as a near-term negative that would pressure profit margins and business models. Sumit Pokharna from Kotak Securities noted that the full financial impact may not be felt until FY28, though early signs could surface as soon as the next H-1B lottery cycle in the latter half of FY27. If companies struggle to adapt their sourcing strategies, competition for on-site talent might intensify, potentially leading to wage inflation of about 10% and impacting profit margins by 100-200 basis points.
In the short term, firms may rely more on subcontractors to fill the gaps left by expiring H-1B visas. However, this strategy could raise costs by an average of 20-25%. With the IT sector already facing challenges, the sudden policy change from Washington has heightened concerns regarding growth prospects and profitability for India's IT giants.
