Synopsis: The US government has planned to adopt a wage-weighted process for selecting applicants for an H-1B visa from FY2027 onwards, given the observation of 70-75% of visas being issued for lower wage levels in the past. Although it has brought Indian IT stocks to the forefront, the effect has been limited due to reduced dependence on the H-1B visa by Indian IT companies.
Indian IT stocks have come into sharp focus once again amid a US crackdown on the H-1B visa framework, replacing the decades-long lottery system with a wage-weighted selection model.
While the move sounds restrictive, the action in the market appears to suggest investors believe the sector is a lot better prepared for this changeover than in previous immigration policy cycles.
What’s the news?
The US has further tightened its H-1B visa regulation by adopting a wage-weighted process in lieu of an equal-chance lottery system, commencing from the H-1B cap season in FY 2027. As per these new regulations, jobs that pay better and possess better skills will be considered a priority, while entry-level jobs will be offered lower probabilities. This arises after evidence emerged showing that between 70% & 75% of all H-1B visas were offered in Wage Levels I & II in recent editions.
Although this has brought renewed attention to Indian IT companies in terms of investments, the industry’s dependence has gradually been reducing over the past ten years. The major companies are now less dependent on H-1B visas because of hiring in the US and near-shoring in Mexico and Canada due to increased offshore implementation capabilities from India.
Will it affect indian IT stocks
The recent changes brought by the H-1B visa rule would not have any deep effect on the Indian information technology industry. The reason is that the Indian IT industry is now less reliant on lower-paying work categories, and the shift towards a wage-weighted model is largely applicable to lower-paying employees.
The Indian IT industry does not have a large dependence on lower-paying work categories for US operations, and over the years, the industry has altered its strategies by increasing local employment.
From a market perspective, the space is now much better positioned than in any of the previous waves of immigration. Visa restrictions now contribute more towards being a manageable issue as opposed to being a threat of growth and margins.
The fact that they already have adjusted costs, as well as global clients leaning heavily on Indian technical know-how, places them very much in a position to withstand these pressures while being a reasonably stable within the equities market to absorb such news.
While the news may sound heavy, it did not affect Indian IT stocks, as stocks like TCS and Infosys are trading flat without much disruption. The NIFTY IT, however, took a little hit by reaching 0.7% lower compared to the previous closing price, therefore not changing anything much for the IT sector.
In fact, even the cost of $100,000 for an H-1B visa is not likely to make any major difference in this calculation. The number of visas actually being used in the IT sector by Indian firms has come down dramatically, which would limit the impact on cost. Additionally, Indian firms can offset this cost impact by various means.
The transition to a talent-weighted, high-paying selection process under the H-1B visa programme makes the $100,000 visa fee less effective, as visa approvals are now more likely to occur in senior positions where such a fee can be factored into the business cost.
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