It's not often that you see the share price of Infosys falling sharply. Until a month back the stock was trading around the Rs 1200 mark and hit a high of Rs 1219 on Oct 12. Since then, the stock has fallen almost 15 per cent to trade at Rs 1038.
New Bill in the US to hurt Indian IT industry
A new Bill that will dramatically reduce the free movement of Indian software professionals from India to the US to complete jobs there could hit the industry. The Bill aims at cutting down use of H1 B visas for Indian IT firms, if they employed more than 50 employees.
The Bill to become a law would take time. On the other hand just ahead of the US Presidential elections, we often see such sensitive issues being raked up.
But, the going has not been good for many IT companies. Earlier this year, the New York Times had reported that the Department of Labour had opened investigation against Tata Consultancy Services and Infosys for "possible violations of rules for visas for foreign technology workers under contracts they held with an electric utility Southern California Edison."
Prior to that there were reports that employees at entertainment giant Walt Disney were laid off and replaced with Indians holding H1B visas. In the midst of all this, if the bill, does become a law it would hurt the Indian IT industry the most.
Margins could be weak
"EBIT (operating) margins for Q3 will be weak due to lower revenue growth and higher investments, however, they will improve in Q4," the management of Infosys said recently in an investor meet.
The company has always been focusing on high margins, however, in a move to win more deals the company may now compromise on margins.
This also has hit the stock of Infosys in the last few days.
Where would the Infosys shares go from here?
At the moment it would be a disaster to predict what would happen in the case of the HIB visas. This makes the Infosys stock risky at the current levels. A lot of institutions and mutual fund schemes are going to be hit, if the Infosys share keep falling. In fact, in most of the mutual fund schemes, Infosys is among the top three holdings.
It's not as if the Infosys stock is the only IT stock that has fallen. TCS has also reacted to the H1B visa issue.
Difficult to predict, which way the share price of these companies could go.