Indian IT stocks decline as US changes H-1B visa rules
What's the story
Shares of Indian IT firms including Infosys, TCS, Tech Mahindra and Wipro fell up to 2% on Wednesday, after the Trump administration announced changes to the H-1B visa selection process. The US Department of Homeland Security (DHS) has replaced the random lottery system of H-1B visa with a weighted selection process. The new method gives more importance to highly skilled and well-paid workers. It will come into effect from February 27, 2026.
Policy change
New process aims to protect American workers
The USCIS has said that the random process was exploited for lower-wage imports, and this new method will provide more protection for American workers. The change also fits US President Donald Trump's promise to reform the H-1B system. This includes a separate policy requiring an additional fee of $100,000 per visa as an eligibility requirement.
Wage distribution
Wage levels and their impact on H-1B visa allocation
The current categorization of H-1B petitions shows that entry-level wage workers (Level I) account for 35%-40% of all applications. This is followed by qualified (Level II) workers at 35%, experienced (Level III) workers at 15%-20%, and fully competent (Level IV) workers making up 10% or less. The new rules will give multiple entries into the selection pool based on these wage levels.
Selection bias
New rules favor higher wage levels in visa selection
Under the new rules, Level IV will have the highest weightage and will be entered into the pool multiple times. This significantly increases its chances of getting a visa. In contrast, Level I categorization gets no extra weightage and has the lowest chances of securing a visa. This change is likely to favor highly skilled workers over lower-wage imports in H-1B visa allocation process.
Impact
Impact of new H-1B visa rules on Indian IT firms
Indian IT firms face a systemic crisis. The $100,000 surcharge makes offshore hiring for junior roles financially impossible, while the weighted lottery favors high-wage roles. This destroys the traditional low-cost delivery model. To survive, firms are pivoting. They are aggressively hiring locally in the US, expanding "near-shore" centers in Mexico, and moving more work back to India. Analysts expect heavy margin pressure as visa costs and US salaries rise, ending the era of high-volume, low-cost H-1B dominance.