H-1B Visa Setback Hits IT Sector, Nifty IT Falls 3%

The Indian IT sector came under heavy selling pressure on September 22 after the latest overhaul of the H-1B visa program by US President Donald Trump. The move has triggered fresh concerns over business costs and profitability for Indian outsourcing companies, sending the Nifty IT index down by as much as 3 percent in early trade.

The sector was already facing headwinds due to sluggish June quarter earnings, a slowdown in IT spending by US businesses, and a major layoff announced by Tata Consultancy Services. The fresh policy shock has amplified investor worries even as the US stock market continues to scale record highs.

Market Impact

Shares of large and midcap Indian IT companies declined between 2 percent and 5 percent, with Tech Mahindra emerging as the worst hit, sliding nearly 4 percent. Wipro, Infosys, HCLTech, and TCS also featured among the top losers on the Nifty 50 index, leading to a broad sell-off across the pack.

The Nifty and Sensex also reflected the weakness, slipping about 0.25 percent in morning trade before recovering from the day’s lows. So far in 2025, the Nifty IT index has shed around 18 percent, highlighting the deep challenges facing the sector.

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Broader Selling in IT Stocks

The weakness extended beyond frontline companies. Firstsource Solutions, despite clarifying that it does not expect any impact from the new visa curbs due to its strong local hiring and globally distributed delivery model, still saw its shares decline over 1.5 percent. Persistent Systems also said it did not anticipate any material impact on its financials or operations, yet the stock was sharply lower during the session.

In a formal statement on September 22, Persistent Systems reiterated that it would continue to monitor the developments closely but maintained that the new rules are not expected to significantly affect its business.

Brokerage Views

Brokerages have flagged risks from the visa overhaul. JPMorgan, in a note to clients, said the new rules could drive up H-1B wages, which may squeeze margins. The brokerage estimated that if companies opt to pay the additional $100,000 fee per application, the hit could be between 2 to 6 percent on FY27 earnings per share, even without disruption to labour supply chains.

Citi highlighted that Infosys and HCLTech have a large portion of their US business independent of visa approvals, with 60 percent and 80 percent, respectively, but still noted that business impact from the new regime could begin reflecting from FY27 onwards.

Jefferies added that talent shortages could push up onsite wages, further pressuring profitability. It warned that under ongoing macroeconomic challenges and AI-related risks, growth could also slow for Indian IT companies.

The Visa Overhaul

On Saturday, US President Trump announced sweeping changes to the visa program, including a mandatory $100,000 fee for new H-1B applications. The move is expected to significantly affect Indian IT companies, many of which derive a large share of their revenue from the US market.

Analysts said the new regime may force IT firms to restructure their business models, either by shifting more work offshore to lower-cost centers or by adopting a more expensive onshore delivery model in the US.

Trade Angle

The development also comes against the backdrop of ongoing trade negotiations between India and the US. Only days earlier, Trump had spoken with Prime Minister Narendra Modi, reaffirming the strategic nature of the bilateral partnership. With the visa overhaul, however, services exports have now become entangled in trade tensions.

Commerce Minister Piyush Goyal is scheduled to visit the US this week with a high-level delegation to continue trade talks. The government is expected to push for relief measures in an effort to reach an early agreement.

Outlook

The latest H-1B visa decision has brought fresh volatility to Indian IT stocks at a time when the sector is already grappling with slowing demand, layoffs, and global macroeconomic uncertainties. While companies such as Persistent Systems and Firstsource have downplayed the immediate impact, investors and brokerages remain cautious about the medium to long-term implications on margins and earnings.

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