Infosys, TCS shares plunge on Trump's proposed H-1B visa rules, market cap erodes by Rs 44,000 cr

Indian IT stocks took a beating on the bourses, falling up to 9 percent today noon following news that a legislation has been introduced in the US House of Representatives. This seeks among other things for more than doubling the minimum salary of H-1B visa holders to $130,000, making it difficult for firms to use the programme to replace American employees with foreign workers, including from India.

Market cap of IT stocks eroded sharply by Rs 44,000 crore on the bourses.

The Bombay Stock Exchange Index went down by 2.79 percent to 9602.79 at 1.50 pm today. Compared to that, the broader Sensex was marginally down by 0.30 percent at 27760.38.

The High-Skilled Integrity and Fairness Act of 2017 introduced by California Congressman Zoe Lofgren prioritises market based allocation of visas to those companies willing to pay 200 percent of a wage calculated by survey, eliminates the category of lowest pay, and raises the salary level at which H-1B dependent employer are exempt from non displacement and recruitment attestation requirements to greater than $130,000. This is more than double of the current H-1B minimum wage of $60,000 which was established in 1989 and since then has remained unchanged.

Here is how leading Indian IT firms fared this noon:

Wipro down               by 2.47 percent at Rs 453.15;

HCL Tech down         by 2.32 percent at Rs 820.25;

Tech Mahindra down  by 3.86 percent at Rs 453.50;

Mindtree down            by 3.52 percent at Rs 449.45;

Infosys down    



         by 2.4 percent at Rs 927.10

Mphasis down            by 2.96 percent at rs 558.45;

L&T Infotech down   by 1.42 percent at rs 667.55;

Mastek down             by 2.91 percent at Rs 188.65.

Despite a sharp fall in the IT stocks, market analysts had a divergent view on the sector.  A K Prabhakar, Head - Research, IDBI Capital Markets, felt that the 'surprise' element regarding what would Trump do with regard to outsourcing of jobs -- a poll promise, was over with his proposed H1-B visa rules. "The worst is behind us. However, Indian Indian IT stocks have felt the shock of Trump's proposed H-1B visa announcement. The visa costs have doubled and will have an impact on margins as it was expected with Trump becoming president." He felt that those firms which had advanced to cloud technology would be able to recoup faster.

However, Prabhakar expects stocks to rebound in the next few sessions and suggests that investors should take position at current levels.

G Chokkalingam, Founder and Managing Director, Equinomics Research and Advisory was hopeful that the H1-B visa ceiling at $130,000 would not come to pass. "The US cannot afford to be aggressive about it as it needs the cooperation of India for political reasons. The US government will compromise," he said.

The IT stocks had created wealth for its investors, Chokkalingam said, adding that further growth at double digits will be tempered with new proposals of the Trump government. "The stocks will consolidate but the fall may not be sharp," he said.