Infosys, TCS shares shrug off H-1B visas worry; here’s why

By: | Published: July 12, 2016 6:20 AM

Shrugging off concerns about the ability of software companies to procure adequate H-1 B visas for their employees in the US, tech stocks rose smartly on Monday in sync with the strong sentiment in the market.

The BSE IT index gained 1.12% to finish at 11,123 even as the Sensex surged 500 points. Ahead of quarterly results announcements later this week, IT majors such as Infosys and TCS were gainers. (Source: Reuters)

Shrugging off concerns about the ability of software companies to procure adequate H-1 B visas for their employees in the US, tech stocks rose smartly on Monday in sync with the strong sentiment in the market.

The BSE IT index gained 1.12% to finish at 11,123 even as the Sensex surged 500 points. Ahead of quarterly results announcements later this week, IT majors such as Infosys and TCS were gainers.

Other stocks such as HCL Infosystems, First Source Solutions and Mastek also rose. Shares of TCS, India’s largest information technology firm, climbed 1.6% on Monday to close at 2,463.65.

However, Zensar Technologies lost some value as did Subex which was down I.79%.
According to a Citi Research report, immigration reform in the US, if implemented, could lead to disruption – likely leading to higher cost, staffing challenges, and benefit to MNCs in the near term, and higher offshore or automation in the longer term as clients look to high costs of local delivery.

While immigration reform is a medium-term risk for the sector, it is difficult to ascertain the timelines or the exact form in which any potential legislation may be implemented, the report added.

Two US lawmakers have introduced, in the House of Representatives, a legislation, which if passed by Congress will hamper the ability of Indian companies to hire IT professionals on H-1B and L1 work visas. The majority of big Indian IT companies are dependent on H-1B and L1 visas in the US and while there may be no immediate impact, such a bill could impact their businesses.

The H-1B and L-1 Visa Reform Act of 2016 introduced by Democratic Congressman Bill Pascrell from New Jersey and Republican Dana Rohrabacher from California would prohibit companies from hiring H-1B employees if they employ more than 50 people and more than 50% of their employees are H-1B and L-1 visa holders.

HSBC, in a note to investors, observed that despite macro concerns regarding Eurpoe, top Indian IT stocks continue to remain attractive as valuations are undemanding, offering some respite against downside.

The BSE IT index has outperformed the benchmark Sensex in the last three years. During calendar year 2015, the IT index generated 4.3% positive returns against 5% negative returns yielded by the Sensex.

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