Tariffs, visa tensions amidst weak demand trigger perfect storm for Indian IT stocks

Investors are aggressively selling stocks of companies with significant exposure to the US market as they fear a recession in the world's largest economy and a slowdown in business global growth following the steep reciprocal tariff announced by the US government. Indian IT services companies draw nearly 65 per cent of their business from the US.

Also read: Stocks sink at Wall Street after Trump’s threat to escalate trade war

Testing times for IT sector

On April 2, US President Donald Trump imposed reciprocal tariffs on 90 countries, including India, which was slapped with a 26 per cent tariff. The US government has claimed that the new taxes are needed to erase a trade deficit between the US and other countries, including China and the European Union.

Analysts believe this could spiral into a trade war, choking global production lines and hard – hitting tech and IT exports. The tariff tension adds another layer of uncertainty for India’s IT sector, which is already grappling with slower client spending and decision delays. A weaker US dollar can reduce the value of earnings for Indian IT companies when converted to rupees, impacting profitability and investor confidence, they pointed out.

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Stock market bloodbath

On Monday, the Indian stock market took a massive downturn, wiping out Rs 14 lakh crore of investors’ money. The market capitalisation of all companies listed on the Bombay Stock Exchange dropped to Rs 389.25 lakh crore from Rs 403.34 lakh crore. Nifty IT slumped 7.7 per cent in trade on Monday, reaching a 52-week low. An intraday low of 30,918.95 mirrored Friday’s meltdown of the Nasdaq, which fell 5.8 per cent, with US tech stocks such as Apple, Nvidia and Tesla faring badly.

The key stocks on the Indian bourses that were impacted were Coforge, which fell 9-9.5 per cent, Mphasis by over 6 per cent, HCL Technologies by over 6 per cent, Infosts lost over 5 per cent in value, TCS declined by about 5 per cent, erasing over ₹60,000 crore in market capitalisation, and LTIMindtree fell around 4 per cent.

Stricter immigration rules

Meanwhile, the Economic Times reported on Tuesday that a new bill introduced in the US Congress aims to scrap the Optional Practical Training (OPT) programme. This programme currently lets international students in science, technology, engineering, and mathematics (STEM) fields—many from India—work in the US for up to three years after finishing their studies. If the bill becomes law, students would have to leave the US right after graduation unless they switch to an H-1B work visa.

Also read: Trump threatens 50 per cent more tariffs on China

Although earlier attempts to end the OPT programme have failed, this bill comes at a time of growing anti-immigrant sentiment in the US. The current administration, under Trump, is doubling down on strict immigration policies and mass deportations—moves that echo his approach during his first term, the newspaper said.

Concerns for H-1B visa holders

According to the Open Doors 2024 report, over 300,000 Indian students were studying in the US during the 2023–24 academic year, and nearly a third of them could be impacted if the OPT programme were rolled back.

In an earlier development, the US government, which introduced new H-1B visa rules effective January 17, 2025, aimed at reducing fraud and ensuring fairness, could lead to administrative processing delays, potentially leaving H-1B employees stranded outside the US for extended periods. The renewal window for non-immigrant visas has been shortened to 12 months, leading to more in-person interviews and creating more complications in the renewal process for H-1B holders. Past experiences, such as during the Trump administration, have shown increased denial rates for H-1B visas, affecting tech companies reliant on these visas. The annual cap on H-1B visas (65,000 regular and 20,000 for advanced degrees) creates stiff competition, with a significant decrease in eligible registrations for FY 2025 compared to FY 2024.

Also read: Black Monday bloodbath: Global markets crash amid fear of escalation in trade war

Muted growth

Meanwhile, brokerage firm Mirea Asset Sharekhan has, in a note to investors, said that the Tier-1 IT service companies are expected to report muted Q4FY25 impacted by lower working days and marginal deterioration in demand. “We expect quarter-on-quarter constant currency (CC) revenue growth of -1.8 per cent to 0.2 per cent for Tier-1 and -0.1 per cent to 13.5 per cent q-o-q revenue growth in CC terms for Tier-2 IT companies”, the note said.

Deal wins TCV (total contract value) is likely to be modest in the absence of large mega deals. Due to increased macro uncertainties, Infosys and HCL Tech are expected to provide conservative growth guidance. The brokerage firm said that management commentaries on deal activity across verticals, cues on discretionary and IT budget spending in the face of increased uncertainty and progress on Gen AI would be key monitorable.

Also read: Trump digs in heels on tariffs, calls them 'medicine' as markets reel

Investment firm Philip Capital noted that with elevated uncertainty, discretionary demand will take longer to revive in the core markets of the US and Europe than earlier anticipated. “Companies with high vertical exposure in manufacturing, retail, CPG, and logistics will likely have a first-level impact on US tariff hikes. Hence, FY26 growth will likely be lower than what was thought at the start of the year,” Philip Capital said.