IT firms brace for H-1B shock; Here's how brokerages assess the impact

As Indian information technology (IT) companies brace for the fallout US President's immigration overhaul policies, analysts reckon that while there will be short-term volatility, the negative impact will be limited in the long run. 

 

Donald Trump signed an executive order raising the H-1B application fee to $100,000, from the earlier $2,000–5,000. The White House clarified it will be a one-time payment, effective September 21, potentially pressuring margins of Indian outsourcers.

 

Analysts noted that the impact on large companies will likely be limited, while the problems may be more acute for mid-tier firms. 

 

On the bourses, the Nifty IT index is the worst-performing sector so far this year. The index is down 16 per cent in 2025, while the benchmark Nifty50 is higher by 7 per cent. Tata Consultancy Services (TCS) shares fell as much as 3.4 per cent, while those of Infosys and Tech Mahindra slipped 3.9 per cent and 6.5 per cent, respectively.  READ STOCK MARKET LIVE UPDATES TODAY

Here's how major brokerages read the latest H-1B development: 

CLSA

• The hike applies only to new applications, not renewals or the overall H-1B stock, limiting the negative impact.
• Worst-case hit of up to 6 per cent to FY27 earnings of Indian IT companies under coverage, assuming the full burden of fresh applications is borne by them. 
• Actual impact should be lower with LTIMindtree and Persistent Systems set to face the highest potential impact (6 per cent), while Tata Consultancy Services faces the lowest. 
• Large-cap IT firms are better placed to manage the fee hike, given their local employee base and established hiring channels in the United States.
• Sector rerating possible 2–3 quarters down the line, aided by better 2026 US macro prospects and a Fed rate cut cycle.
• Reiterate Outperform rating on large caps (TCS, Infosys, HCLTech, Wipro) where the earnings hit is limited to 1-3 per cent of FY27 profit after tax in the worst-case scenario.

Motilal Oswal

• First impact likely in FY27 petitions, as the H-1B lotteries and filings are run in the fourth quarter to the first quarter.
• Over the past decade, Indian IT vendors have reduced reliance on H-1B visas, and the order is likely to face legal challenges in US courts.
• Big Tech (Google, Amazon, Microsoft, Meta) accounts for a larger share of fresh applications than Indian IT.
• Delivery models already factor in localisation and subcontracting, making vendors better placed to adjust.
• Given the high cost, companies may avoid new filings and instead expand offshore delivery or increase local hiring. 

 

Nuvama Institutional Equities

• Fee hike from could affect Indian IT operations, though the impact should be limited.
• Mitigation levers include higher offshoring/nearshoring and local hiring; the industry has already reduced reliance on H-1B visas over the past eight years.
• Companies may opt out of fresh filings as the fee makes the H-1B visa economically unviable.
• Some near-term operational and financial impact is expected, though long-term offshoring will offset much of it.
• However, the Sector is likely to remain volatile in the near term amid uncertainty.

Emkay Global

• Companies can prepare by boosting local hiring, using L-1 visas, limiting H-1B usage, renegotiating contracts, or shifting work offshore.
• The overall impact is unlikely to be disruptive, though stock prices may face near-term pressure on fears of rising protectionism.
• Indian IT firms already use H-1B visas sparingly, mainly for convenience or skill gaps.
• No immediate earnings risk, but higher onsite wage costs and the new fee could affect FY27 profitability.

Nomura

• Worst-case impact estimated at about 10-100 basis points on margins for its coverage universe.
• Clients and IT service providers are expected to increase offshoring and automation to offset higher visa costs. And, growth in Global Capability Centres (GCCs) in India is likely to accelerate.
• Over the medium to long term, Indian IT operating models will further reduce dependence on H-1B visas.
• Impact over the next year is seen as negligible.
• Any sharp correction in stock prices should be viewed as an opportunity to accumulate.