Indian IT stocks continued their downward trend for the fourth consecutive day, reacting to the Trump administration's announcement of a $100,000 one-time fee on H-1B visas. The sector faced significant pressure, with major companies experiencing notable declines in their stock prices.

Market Performance

The BSE IT index dropped 1.10% to 34,149.55, reflecting the overall negative sentiment in the sector. Key players in the Indian IT landscape saw substantial losses:

The broader market also felt the impact, with the BSE Sensex falling 555.95 points to 81,159.68 and the NSE Nifty dropping 166.05 points to 24,890.85.

Cumulative Impact

The effect of this policy change has been severe on the valuations of major IT firms:

• Since last Friday, five major IT companies have collectively lost Rs 1,36,387.50 crore in market capitalization.
• TCS, the industry leader, saw an erosion of Rs 75,798.93 crore in its market value.
• Infosys faced a decline of Rs 23,119.19 crore in its market capitalization.

The Nifty IT index has plummeted more than 6% this week, underscoring the sector-wide impact of the visa fee hike.

H-1B Visa Concerns

The new $100,000 one-time fee on H-1B visas is particularly concerning for Indian IT companies, as Indian tech professionals account for over 70% of H-1B visa holders. This additional cost could significantly impact the operational expenses and hiring strategies of these firms in their U.S. operations.

Infosys Corporate Update

Amidst the market turmoil, Infosys announced the completion of a merger between two of its wholly-owned step-down subsidiaries. As per the company's LODR filing:

• Infosys Germany GmbH and Blitz 24-893 SE have merged.
• The merger was completed on September 24.
• The resulting entity is now known as Infosys Germany SE.

This corporate restructuring in Europe comes at a time when the company, along with its peers, is facing challenges in the U.S. market due to the visa policy changes.

Outlook

The IT sector's performance in the coming days will likely be closely watched by investors and analysts. The industry may need to reassess its strategies for global operations, particularly in the United States, in light of the new H-1B visa fees. Meanwhile, corporate actions like Infosys's European subsidiary merger indicate that companies are continuing to optimize their global structures amidst these challenges.

The Indian government is taking swift action to bolster its Global Capability Center (GCC) policy in response to recent changes in H-1B visa fees. This strategic move is expected to create a mix of short-term challenges and long-term growth prospects for the Indian IT sector.

GCC Policy Acceleration

In a proactive response to the evolving global workforce landscape, particularly the changes in H-1B visa fees, the Indian government is ramping up its efforts to promote Global Capability Centers. GCCs, also known as captive centers, are offshore units established by multinational companies to tap into India's vast talent pool and cost-effective operations.

Short-Term Disruptions

The accelerated push towards GCCs is likely to cause some immediate disruptions in the IT sector:

• Talent Reallocation: Companies may need to quickly adjust their workforce strategies, potentially leading to shifts in talent allocation between onsite and offshore projects.
• Operational Adjustments: IT firms might face challenges in recalibrating their business models to align with the increased focus on GCCs.
• Client Negotiations: Service providers may need to renegotiate contracts with clients to account for potential changes in delivery models and cost structures.

Long-Term Growth Opportunities

Despite the short-term challenges, the government's accelerated GCC policy presents several long-term growth opportunities for the IT sector:

• Increased Foreign Investment: The policy is likely to attract more multinational companies to set up or expand their GCCs in India, potentially leading to increased foreign direct investment.
• Job Creation: As more GCCs are established, it could lead to the creation of high-skilled jobs in the IT sector, potentially offsetting any job losses due to H-1B visa restrictions.
• Skill Development: The growth of GCCs may drive demand for specialized skills, encouraging upskilling and reskilling initiatives within the IT workforce.
• Innovation Hubs: GCCs often serve as innovation centers, which could boost India's position as a global tech innovation hub.

Impact on IT Companies

The IT sector's response to these changes will be crucial. Companies that can quickly adapt to the new landscape, leveraging the GCC model effectively, may find themselves at a competitive advantage. However, firms heavily reliant on the H-1B visa model for their operations may need to undergo significant strategic shifts.

As the situation continues to evolve, industry stakeholders will be closely monitoring the implementation of the accelerated GCC policy and its effects on the IT sector's dynamics. The coming months will be critical in determining how well the industry can navigate these changes and capitalize on the emerging opportunities.