Share prices of information technology (IT) companies fell anywhere between 2.6% and 4.8% on Tuesday after the recently introduced immigration restrictions by US President Donald trump and the new legislation that aims to rework the H-1B visa programme. The BSE IT Index fell by more than 5% intraday, before closing at 9,586.34, nearly 3% down on Tuesday.
The stock of Tata Consultancy Services (TCS) fell by 4.47%, the biggest single-day loss on Tuesday in last two months. HCL Technologies’ shares too registered their biggest single-day loss since April 2016 by dropping 3.67% on January 31. The stock price of other IT firms like Infosys, RS Software India, Mindtree, Wipro fell between 1.6% and 3.3%.
TCS’s stock price corrected over 18% from its August peak as the company reported one of the lowest earning growth for the nine months period ending December 2016. The IT major’s consolidated net profit grew 9.7% during the period against 11.5% in the previous period.
TCS flagged issues surrounding the H1-B visas in the US as a key challenge going forward. Although, N Chandrasekaran, the then CEO of TCS, while announcing company’s Q3 results on January 22, observed that the company is well-prepared to meet the challenges following regulatory changes relating to visas in the United States.
Share price of Infosys also fell by over 27% since June 2016. Post demonetisation of higher value currency notes, the stock hit two-year low on November 22, 2016. Even Mindtree’s stock price fell by over 39% in last one year.
Most of the IT companies generate a large percentage of their revenue from the US, according to the Bloomberg data. Infosys generated 63% of their revenue from North America in financial year 2016. Other firms like TCS, Wipro, Mindtree have generated 55%, 50% and 64% of their FY16 revenues from the US.
“Infosys management indicated that it is taking several measures to increase local hiring. The management also expressed confidence about robust growth in 4Q and FY2018 based on deal pipeline and optimism among BFSI clients in view of likely rise in interest rates,” said Kotak report published on January 16.
The new bill proposes to prioritise market-based allocation of visas to those companies willing to pay 200% of wage, eliminate the category of lowest pay, and raise the salary level at which H1B dependent employers are exempted from nondisplacement and recruitment attestation requirements to greater than $130,000. This is more than double of the current H1B minimum wage of $60,000 which was established in 1989 and since then has remained unchanged.
“Revenue growth in the December quarter will be muted due to twin combination of usual end-of-the-year furloughs and continuing weak spending environment. The set up for 2017 is promising with early indications of stronger financial services spending and initial signs of integrated digital contracts but is counterbalanced by possible delays in budgeting in select verticals and likely changes to visa rules will be the key element to focus on in FY2018,” said a Kotak report published on January 2.