The Indian IT sector is bracing for a potentially turbulent Monday following President Trump's proclamation to significantly increase H-1B visa fees. The move, which raises the annual fee to $100,000 per visa, has sparked fears of a sell-off in already pressured Indian IT stocks.

Impact on Indian IT Companies

Indian IT firms heavily rely on H-1B visas to deploy skilled engineers to the United States for client projects. With Indian companies sponsoring 13,396 H-1B visas, the new fee structure would increase their collective expenses from approximately $13.4 million to a staggering $1.34 billion annually. This increase could represent roughly 10% of the combined net profits of major IT players like TCS, Infosys, HCLTech, Cognizant, and LTIMindtree in FY25.

Senior Research Analyst at SMC Global Securities, Seema Srivastava, believes that this fee hike will severely impact both Indian and US-listed IT companies with significant US operations, diminishing their competitiveness.

Stock Market Reaction and Expert Opinions

The immediate market reaction to the announcement was negative. On Friday, shares of Cognizant Technology Solutions reportedly fell by 4.75% on the Nasdaq, while Infosys' share price dropped by 3.40% on the NYSE. Stock market expert Ambareesh Baliga told ETV Bharat that a sharper fall in IT stocks is expected when the Indian markets open on Monday. He estimates this drop could be between 10% and 15%, possibly unfolding within the next two to three days.

CEO and lead analyst at Pareekh Consulting, Pareekh Jain, warns of an immediate impact on profit margins, especially if the rule applies to existing visa holders. He suggests that this could potentially shave 1% to 2% off sector-wide EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) margins.

Concerns and Potential Challenges

Nasscom, the Indian IT industry body, has expressed concerns about the disruption to business continuity for onshore projects and the uncertainty created for businesses, professionals, and students due to the sudden implementation timeline.

The increased visa costs could force companies to strategically rethink their overseas operations. While Indian companies have been gradually increasing local hiring in the US, the sudden spike in visa costs is expected to weigh on margins.

Sandeep Pandey, Co-founder of Basav Capital, suggests that the move aims to increase job opportunities for American workers, who may demand higher salaries and potentially be less efficient than their Indian counterparts. This could further strain company margins.

Government Response and Clarifications

India's Ministry of External Affairs has stated that the H-1B visa fee hike could have "humanitarian consequences" due to potential disruptions for families. They expressed hope that US authorities would address these disruptions suitably and are studying the policy's implications.

The White House has clarified that the $100,000 fee is a one-time payment applicable only to the petition and does not affect those who already hold H-1B visas and are currently outside the US.

Potential Long-Term Impacts

While the immediate outlook appears bleak, some experts suggest potential long-term benefits for India. The increased costs could encourage more skilled professionals to return to India, and US companies might be forced to outsource more work to India.

Monday's Expectations

Given the overnight decline in the US-listed shares of Indian IT firms and the concerns raised by experts, Indian IT stocks are likely to face significant selling pressure on Monday. Investors are worried about the immediate impact on profit margins and the potential long-term challenges the increased visa fees pose to the sector's competitiveness. The market will be closely watching how companies respond to this new regulation and whether the Indian government can negotiate any राहत or modifications with the US administration.