- The BSE Sensex rose over 1% despite U.S. H-1B restrictions. The rise points to more resilient IT business models and strong momentum in the domestic sector
- Indian tech firms increased local hiring in North America, built nearshore operational hubs, and expanded AI-driven offshore execution. These actions significantly cut their operational dependence on H-1B visa allocations.
- However, the index is still down 14% year-to-date, owing to foreign capital outflows, global protectionist tariffs, and high international interest rate policies.
News reports have been indicating challenges for India’s IT sector, despite the Sensex climbing approximately 1.3% intraday to 72,533 on Friday. This follows the US suspending several IT firms, including Infosys, Tata, Wipro, and HCL, from the Permanent Labour Certification (PERM) program.
While PERM relates to the green-card process for foreign workers and is distinct from H-1B visa policies, these actions signal increasing difficulties for Indian IT companies.
The current market activity, showing a rebound despite these headlines, provides insight into how the market is functioning, institutional pricing strategies, and overall sentiment in Indian stock indices.
What the Rebound Says
The market’s rise appears to be a combination of technical buying after recent declines and underlying strength within the IT sector.
Earlier in the week, the Sensex had dropped over 1,000 points to a multi-month low, influenced by rising crude oil prices, increasing global yields, and continued selling by foreign institutional investors.
Gains on Friday were primarily driven by IT stocks. The Nifty IT index increased by about 2%, with TCS shares rising nearly 5% following its announcement of stronger AI-related and international revenue growth for the September quarter. TCS reported a Q2 net profit of ₹13,884 crore, a 14.9% year-on-year increase, and its stock saw a gain of over 4%.
This performance suggests the market has largely factored in the uncertainty surrounding immigration policies. Over the last decade, major Indian IT firms like TCS, Infosys, and Wipro have actively reduced their reliance on visa-dependent offshore models.
Through increased local hiring in North America, expanded nearshore delivery centers, and the adoption of AI-driven automation offshore, changes in H-1B policies now pose less of a risk to earnings compared to previous regulatory environments.
Nasscom, an industry association, has stated that the recent restrictions primarily impact green-card pathways and not the core H-1B program. The proportion of PERM applications associated with these companies is considered modest.
Will the Bearishness Extend?
A continued downturn in the near term is possible. The recent rally follows an eight-week period of losses where indices declined by 8-9%, and the Sensex is down approximately 15% for the year.
Market analyst Arun Kejriwal suggests the current gain might be a temporary bounce, cautioning that weakness could return next week. Key factors contributing to pressure remain evident. Brent crude is trading near $103, and the US 10-year Treasury yield is around 5.25%.
Further increases in oil prices, escalating geopolitical tensions, or more aggressive policy tightening could extend the current market correction.
Additionally, foreign investors are likely to continue selling while yields remain above 5%. They have already divested a record ₹2.91 trillion this year. Historical trends indicate that Indian markets have often recovered once foreign capital inflows stabilize and domestic liquidity provides support.
How Should Investors Position Themselves?
In an environment characterized by high volatility and shifts in macroeconomic policies, making aggressive directional bets carries risk. Investors might consider adopting a disciplined, defensive approach.
Instead of avoiding the technology sector altogether, it may be beneficial to focus on financially strong sector leaders. These companies should have robust digital transformation roadmaps, expanding operating margins, and proven offshore execution capabilities.
Short-term traders could consider focusing on technical support levels near recent lows, while managing their position sizes carefully.
The Sensex climbed as investors found value after its recent sharp losses. Strong IT results, especially from TCS, also gave it a boost. These have calm concerns about PERM suspensions.
Yes. Over the past few years, Indian IT companies have reduced their dependence on new H-1B visas. They’ve achieved this by hiring more locally in the US and expanding their offshore operations, effectively limiting any immediate impact on their work.
Stabilising oil prices, reduced foreign selling and continued resilient corporate earnings, particularly in technology and domestic-focused sectors, would provide important confirmation.