H 1B shock and trade tariffs will force investors to reassess India’s growth story

The sudden overhaul of US H‑1B visa fees, coupled with looming trade tariffs, will force investors to rethink India’s growth story and whether its premium valuation remains justified. Analysts say the market may be derailed in the short-term on signals of heightened geopolitical and policy risk, with the US willing to weaponise both visas and trade, leaving India’s export engines exposed.

While ADRs of major Indian IT firms skid 4–7% intraday before partially recovering on Friday after the visa announcement came in, the implications of this could be much more than just the impact on IT stocks and could snowball into macro concerns.

Analysts warn, the rupee could come under pressure if foreign institutional investors run toward exit, while earnings expectations for export-focused sectors continue to get downgraded.

“If higher visa costs delay projects or reduce margins, those forex inflows will slow and that leaves the rupee exposed, because at the same time there’s always something underlying risk of FIIs trimming equity holdings with already high valuation concerns,” said an analyst at a top broking firm.

Pain beyond IT

Market unease stems from the arbitrary timing and scale of the fee hike, highlighting India’s dependence on the US for tech talent and goods exports as a bargaining chip.

“The H‑1B visa fee hike has caused significant unease in Indian markets, immediately impacting IT and tech stocks,” said Rajesh Palviya, SVP – Research at Axis Securities. “This comes even as India navigates the 50% tariff threat, with no resolution in sight. Together, these risks make it difficult for the market to accurately assess cross-border demand and margin outlooks. The impact could be beyond IT stocks.”

Tough tariff negotiations

Siddharth Oberoi, founder and CIO at Prudent Equity, added that the implications go beyond near-term earnings. “This will affect US-India relations and may complicate future trade negotiations. The increase will directly impact Indian IT firms as well as US multinationals, much like tariffs affect manufacturing exports.”

Data shows nearly 70% of H‑1B beneficiaries are Indian nationals, with China accounting for about 10%, making the move appear particularly targeted. “It also puts pressure on the Indian government to bring H‑1B back to the negotiating table, where the US will likely hold the upper hand,” Oberoi said.

Ashish Nigam, President and CIO at Axis Asset Management, warned that the fallout could be broader than tariff concerns. “Goods exports account for just 2% of GDP, but software is nearly 10%. This isn’t only about IT firms; there are jobs at stake. Over the next six months, we may see significant earnings pressure. It’s hard to predict though.”

Also read: IT stocks stare at fresh margin squeeze and de-rating on H-1B fee hike sparks

Sectors impacted immediately

Beyond IT, investors are watching pharma, auto components, and select industrial exporters reliant on US market access. “If project staffing or regulatory approvals are delayed, it affects not just onsite tech workers but any India-based exporter dependent on smooth US operations,” said an analyst at a domestic brokerage.

“This move is akin to a tariff on services,” Oberoi said. Till clarity emerges on both fronts, traders say markets will remain skittish. “This kind of twin uncertainty — visas on one side and tariffs on the other — creates a risk-off mood,” said Nigam.