H-1B visas, capped at 65,000 per year, are in huge demand from outsourcers

IT stocks witnessed sharp selloff on Friday, when domestic markets opened for normal trading after a two-day break. Tata Consultancy Services, India's biggest outsourcer, fell 3 per cent in a market that closed 1 per cent down. Other frontline IT stocks such as HCL Tech, Wipro and Infosys also ended lower.



The selloff in IT stocks is being linked to the recently introduced Grassley-Durbin bill (named after US senators) that seeks to "reform and reduce fraud and abuse" in certain short term visa programmes.



Temporary, non-immigration visas - such as H-1B- have run into controversy amid allegations that they are being misused to displace Americans with cheap foreign workers. The new bill, introduced on November 10, seeks to prohibit companies that employ over 50 per cent of workers on H-1B and L-1 visas from hiring through this route. (Read)



It would also give US Department of Labour enhanced authority to review, investigate and audit employer compliance as well as to penalise fraudulent or abusive conduct.



Traders say the bill is a setback to domestic outsourcers, who have been key beneficiaries of the H-1B visa programme. In 2014, 70 per cent of H-1B visas went to workers from India; TCS topped the list with 5,650 H-1B visas, while Infosys (3,454) and Wipro (3,048) also got large number of H-1B visas, according to The New York Times.



H-1B visas are capped at 65,000 per year (20,000 additional visas are for students), so domestic outsourcers compete with global giants to bring "qualified" workers in the US, which is the biggest market for Indian IT companies.





Fall in Technology stocks on H1B visa issues has traditionally always been a buying opportunity. — sandip sabharwal (@sandipsabharwal) November 13, 2015

But the visa issue is unlikely to emerge as a long-term overhang for IT stocks because it tends to come under scrutiny ahead of every election in the US, analysts said."Fall in technology stocks on H-1B visa issues has traditionally always been a buying opportunity," tweeted fund manager Sandip Sabharwal.The bigger worry for tech stocks could be heavy selling by foreign institutional investors in domestic stock markets. FIIs have large holding in IT stocks; they held 12.69 per cent in TCS and nearly 40 per cent in Infosys as of September 30, 2015.FIIs have turned net sellers in anticipation of a potential US interest rate hike next month. In November, foreign institutional investors have been net sellers of Indian equities for around Rs 3,700 crore so far.On Friday, TCS closed 3 per cent lower at Rs 2,397.30, while HCL Tech ended 1.9 per cent lower at Rs 836. Wipro fell 1 per cent to 551.50, while Infosys declined 0.8 per cent to close at 1,100.45.