The Indian IT sector is facing headwinds as the U.S. government's decision to scrap the H-1B visa lottery system in favor of prioritizing higher-skilled and higher-paid workers has led to a decline in IT stocks. This shift in policy is expected to impact the talent acquisition strategies and operational costs of major Indian IT companies, including Infosys, TCS, Wipro, and Tech Mahindra.
Market Reaction
The immediate market reaction to this news has been negative, with stocks of IT companies experiencing a slide. Coforge and Tech Mahindra, in particular, have seen their stocks dip by up to 1%. On December 24, 2025, Tech Mahindra's share price decreased by -0.84% from its previous close. Similarly, Coforge's share price experienced a downturn of -0.95%. This decline reflects investor concerns about the potential impact of the H-1B visa changes on the profitability and growth prospects of these companies.
H-1B Visa Policy Overhaul
The U.S. Department of Homeland Security (DHS) has announced a modification to the H-1B selection process, replacing the existing random lottery system with a weighted selection approach. This new system will prioritize workers with higher skills and those commanding higher salaries. The DHS stated that the random process had been exploited for lower wage imports and that this change would better protect American workers. The rule is scheduled to take effect on February 27, 2026, in time for the fiscal year 2027 H-1B cap registration season.
The H-1B visa program allows U.S. employers to hire foreign workers in specialized fields, and is widely used by technology companies. The program issues 65,000 visas annually, with an additional 20,000 visas for workers with advanced degrees.
Impact on Indian IT Companies
Indian IT firms heavily rely on the H-1B visa program to deploy their skilled workforce to the U.S.. The move towards prioritizing higher wages and skills may necessitate strategic adjustments in talent acquisition and could potentially lead to increased labor costs for these companies. The revised H-1B selection process could present considerable challenges for Indian IT firms. This policy change has the potential to significantly affect the business models and profitability of Indian IT exporters. It could lead to increased operational costs, a reduced inflow of skilled Indian professionals to the U.S., and potentially drive companies to invest more in local hiring or alternative talent pools.
Broader Implications
The H-1B visa rule change is part of a broader effort to reform the immigration system and protect American workers. The Trump administration has already imposed an additional $100,000 fee on new H-1B visa applications. Moreover, the U.S. State Department has expanded social media screening to all H-1B and dependent H-4 applicants. This enhanced vetting has led to widespread rescheduling of visa interviews across India, leaving many professionals stranded after traveling home for visa stamping.
Company Performance
Coforge has delivered a -5.25% change over the past year. Tech Mahindra's share price returns a 1-year change of -4.64%. These figures indicate the challenges faced by these companies in the current market environment.
Strategic Responses
In response to these changes, Indian IT companies may need to explore alternative talent acquisition strategies, such as increasing local hiring in the U.S. and nearshore locations. They may also need to invest in upskilling and reskilling their existing workforce to meet the demand for higher-skilled professionals. Some experts believe that the changes will have a marginal impact on Indian and India-centric companies, as they have been reducing their dependence on H-1B visas.
