IT shares extend fall; Infosys nears 52-week low

Infosys, TCS, Tech Mahindra, Wipro and HCL Tech were down upto 7% in past two trading sessions.

Shares of information technology (IT) companies were trading lower for the second straight day after a reform bill has been introduced in the US House of Representatives mandating that the minimum salary of H-1B visa holders will be doubled to US$130,000.

Infosys, Tata Consultancy Services (TCS), Tech Mahindra, Wipro and HCL Technologies were trading down in the range of 1% to 2% on the National Stock Exchange (NSE). All these stocks ended lower by up to 4% on Tuesday.

At 10:01 am; the Nifty IT index, the largest loser among sectoral indices, was down 2% as compared to 0.01% rise in the Nifty 50 index. In past two trading sessions, the IT index dipped 5.2% against 0.81% decline in the benchmark index.

Among the individual stocks, TCS was down 2% at Rs 2,177, extending its Tuesday’s 4.4% decline on the NSE. Infosys was trading at Rs 909, fell 4% in past two trading sessions. The stock hit an intra-day low of Rs 905, quoting close to its 52-week low of Rs 901 touched on November 9, 2016.

The legislation called the High-Skilled Integrity and Fairness Act of 2017 prioritizes market-based allocation of visas to those companies willing to pay as much as 200% of a wage calculated by the survey. The legislation also proposes eliminating the 'lowest pay' category. The raised salary level - to more than $130,000 - is more than double the current H-1B minimum wage of $60,000, which was established in 1989 and has since remained unchanged.

Hike in H-1B visa cost will have significant impact on the financials of the company, as Indian companies while are major users of H-1B visa (according to reports around 85%), though they form very less part of the overall workforce (around 11-15%).Depending upon the companies, they could easily witness around 60-70% rise in the salaries of the H-1B visa dependent workforce, and hence have significant impact on the net profit of the companies, according to Ms. Sarabjit Kour Nangra, VP Research- IT, Angel Broking.

However currently the bill is yet to be passed and most of the companies are looking at mitigating the risk through increasing the local recruitment, more off-shoring, moving offices to low cost states. Thus the real impact will be difficult to pin down and would be depend upon the time when it actually gets implemented; which according to us could take time, said Ms. Sarabjit Kour Nangra.

Overall, the brokerage firm remains positive on the IT sector, and currently maintains picks in the space-HCL Technologies and Infosys.

		% chg
Company	LTP	1-day	2-days
TCS	2177.00	-2.4	-6.7
HCL Technologies	787.50	-2.9	-6.3
Tech Mahindra	446.20	-1.3	-5.4
KPIT Tech.	128.95	-0.9	-4.8
Infosys	908.95	-2.1	-4.3
Tata Elxsi	1396.90	-1.9	-4.2
Mindtree	448.00	-0.6	-3.8
Wipro	452.75	-1.1	-2.8
Nifty IT	9651.10	-2.00	-5.11
Nifty 50	8561.95	0.01	-0.82
LTP: Last traded price on NSE in Rs at 10:07 am