'Minimal Impact on IT': BNP Paribas analyst explains the H-1B Visa norms impact on Indian stocks

Kumar Rakesh of BNP Paribas believes that the impact of the new H-1B visa norms released by the Department of Homeland Security on Tuesday night, will be very minimal, as the exposure of Indian IT companies to the visa is now down to very few basis points.

The Department of Homeland Security put an end to the Lottery system of issuing visas to eligible participants, replacing it with a more stringent, weighted driven process, that will lay more emphasis on highly skilled and highly paid foreign workers to get a visa.

As per the earlier lottery system, nearly 70% of the visas were issued to workers with lower wages.

"If you check around, speak with any of the companies, industry experts, even the enterprise customers, they are very comfortable actually offshoring. Most of these work as well, and now incrementally, what they are looking at, especially after the introduction of $100,000 visa fee, is call only those experts who are actually needed and for whom customers are willing to pay," Rakesh told CNBC-TV18 in an interaction.

Rakesh alluded to the strong contingencies that are available in the form of offshoring, increased local hiring, which companies have already done and something that is likely to pick-up pace in the upcoming year as well.

"And hence, using all these couple of levers, these companies should be able to largely mitigate and hence, across the IT services companies. In India, we do not see much of impact of this," he said.

The BNP Paribas analyst believes that the sector had begun to look like hitting a bottom in October, and that IT services will be a good space to hedge against any Gen AI concerns.

"In the last few weeks, we have started seeing Global Investors also starting to look at it services in a more sanguine way and enhance the setup from valuation perspective, under position in the sector for both domestic and foreign institutional investors, all of that suggests that it is a good setup for the sector. Add to that favourable macro data which we were talking about earlier, does indicate that sector should continue to outperform, at least in the near term," he said.

Rakesh likes Infosys within the largecap IT space, and Persistent Systems within the Midcap IT space.

Indian IT stocks are off the lows of the day, with shares of TCS having turned positive, while those of Coforge, Persistent Systems, and Wipro still trading with losses between 0.7% to 1.4%.

Also Read: H-1B changes in US: What Indian IT firms’ exposure looks like as visa rules change