IT stocks muted as US may announce foreign workers' visa restrictions today

Topics IT stocks | H-1B Visa | Donald Trump

Emkay Global notes that Indian tech companies, in general, have been reducing their dependence on visas by hiring more people locally.
Shares of most information technology (IT) companies were trading flat with negative bias on Monday as investors turned cautious after the US President Donald Trump said late on Saturday he would announce new restrictions on visas within a couple of days to block the entry of certain foreign workers and protect Americans struggling with a job market devastated by the coronavirus pandemic. 

“We’re going to be announcing something tomorrow or the next day on the visas,” he told Fox News Channel. Asked if there would be exclusions from the new restrictions, Trump said very few. READ MORE

At 11:13 am, the S&P BSE Information Technology index was trading 0.18 per cent lower at 14,509.47 levels, with Ramco Systems (down 5 per cent) being the top loser. Other top losers on the index were Zensar Technologies (down over 3 per cent), Cigniti Tech (down 3 per cent) and Intellect Design Arena (down over 2 per cent). 

On the other hand, Mastek was trading over 5 per cent higher and was the top gainer on the index. 

The benchmark S&P BSE Sensex was ruling 0.65 per cent higher at 34,957.84 levels. 

Analysts at Emkay Global Financial Services, in a report dated June 18, note that the Notices of Intent to Deny (NOIDs) and Request for Evidence (RFE) have gone up substantially under the Trump regime, given the much public leanings of the administration (as seen in the ‘Buy American Hire American’ order in 2017). 

"We note that Denials (both Initial and Continuing) surged over the years for H1B applications. Apart from the increase in the number of denials for H1B visa petitions, there is a marked increase in the number of RFEs (for both H1B and L1 visa) along with a reduction in approvals with petitions with RFEs (for H1B). This has also resulted in a record number of H-1B–related federal lawsuits filed against the United States Citizenship and Immigration Services (USCIS) in recent years," wrote Manik Taneja and Monit Vyas, analysts at the brokerage firm. 

The brokerage notes that while Indian tech companies are not completely immune to further pressures, they are, in general, have been reducing their dependence on visas by hiring more people locally. "Even during Covid-19 times, companies have resorted to virtual transition on deals for clients. Given a weak macro environment and potential reset in client businesses due to Covid-19, we see a case for greater offshoring in the sector over the medium term," it said. 

The brokerage has a "buy" rating on HCL Tech and Tech Mahindra with the target price of Rs 600 and Rs 620, respectively.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel