IT Stocks Fall: H-1B Rule, Kotak Downgrades Hit TCS, Infosys

Indian IT stocks, notably Tata Consultancy Services (TCS) and Infosys, experienced a sharp decline on Friday. This market downturn was primarily driven by a proposed US H-1B visa fee rule advancing and key rating downgrades from Kotak Institutional Equities.

H-1B Visa Rule Raises Concerns

A new US rule concerning H-1B petition fees cleared a critical White House review, sparking fresh apprehension for technology firms. These companies heavily rely on the US visa program to deploy workers.

• The proposed US rule is identified as RIN 1615-AD20.
• This measure adds to prior actions, including a $100,000 fee for foreign workers introduced last year by the Trump administration.

Kotak Institutional Equities Downgrades

Selling pressure intensified following Kotak Institutional Equities’ decision to downgrade ratings on several prominent IT stocks. The brokerage adjusted its outlook for two major players.

• TCS: Downgraded to ‘Add’ from ‘Buy’, with a target price of Rs 2,450.
• Kotak noted that large deal wins in the past three quarters had not translated into substantial overall growth for TCS, also flagging limited acquisition strategy progress.
• Infosys: Downgraded to ‘Add’ from ‘Buy’, holding a target price of Rs 1,200.
• The brokerage anticipates Infosys will underperform competitors like TCS, HCL Technologies, and Cognizant in organic growth for FY27.
• Further challenges are projected for Infosys in FY28 due to the loss of a major European account.

Other affected stocks included Coforge, Fractal Analytics, Persistent Systems, HCL Technologies, KPIT Technologies, and Zensar Technologies. The twin pressures of regulatory changes in a crucial market and revised analyst expectations underscore a challenging environment for Indian IT majors.