Indian IT stocks defied expectations and climbed despite the US suspending major global IT firms, including Indian players, from the Permanent Labour Certification Programme (PERM). This program is a key step for US employers to secure green cards for foreign employees on H-1B visas. The suspension was expected to disrupt operations, yet Wipro, Infosys, HCL Technologies, and TCS saw gains of around 3% to 5.5% on Friday, with the overall Nifty IT index rising 3%.
The US move aimed to curb alleged abuse of the H-1B visa system by Indian IT giants, which was seen as undercutting wages for American workers. However, Indian IT firms have reduced their dependence on H-1B visas over time, especially since the Covid-19 pandemic accelerated remote work. This shift to offshoring and nearshoring, where employees work from different or nearby locations, has lessened the need for H-1B visas. Additionally, Indian firms have been hiring more US citizens for onshore operations.
Analysts noted that the impact of the suspension is minimal. Sumit Pokharna of Kotak Securities stated that Indian companies had already started hiring more local US employees, reducing the material impact of the move. TCS, for instance, announced plans to hire 15,000 people in the US over the next five years and reported that its PERM applications were in single digits over the last two years. Acquisitions of US-based firms, such as TCS’s purchases of ListEngage and Coastal Cloud, have also bolstered their local workforce.
Despite the suspension, experts believe the impact on earnings and margins will be limited. Vaibhav Chechani of TCG Asset Management suggested that any margin impact could be recovered when the global environment improves. The positive market reaction also followed TCS’s Q2 results, which met street estimates, and Accenture’s better-than-expected revenue forecasts, signaling stability in the IT sector.