H-1B worries: What to expect from Indian IT stocks tomorrow
What's the story
Indian IT stocks are reeling under pressure after US President Donald Trump announced a massive hike in H-1B visa fees. The new annual fee for fresh applications has been set at $100,000. While the increase only applies to new applications, it has sent shockwaves through the market as over 70% of H-1B holders are Indians.
Market reaction
ADRs of top Indian IT companies crash
The announcement has had an immediate impact on the market, with American Depository Receipts (ADRs) of top Indian IT companies crashing. The move is considered a major blow to the Indian IT sector, which heavily relies on the US market. Analysts believe that while this setback may affect sentiment in the short term, it is expected to weigh more on sentiment than on fundamentals.
Investor guidance
Increased costs will hurt Indian IT exporters
Kranthi Bathini of WealthMills Securities warned that the increased costs will hurt Indian IT exporters in the near term. He said, "The $100,000 annual fee is a big blow. It was completely unexpected." However, he also reassured long-term investors not to panic as Indian IT companies have weathered global shocks and economic slowdowns in the past.
Sector challenges
Indian IT firms already facing weak earnings
The timing of Trump's announcement is particularly bad as Indian IT firms are already facing weak earnings, a slowing global demand, and the threat of artificial intelligence affecting their revenue. Jefferies recently warned that AI could cause up to 20% revenue deflation in IT services between 2025-2030. Further, foreign institutional investors have already pulled almost ₹62,000 crore from Indian IT stocks this year.