H1B visa fee hike unlikely to spark large sell-off in IT stocks: Sandeep Muthangi, IIFL

In a chat with ET Now, Sandeep Muthangi, IIFL, talks about the potential impact of the H1B visa fee hike on India's IT space. Excerpts:

ET Now: Do you think the H1B visa fee hike will lead to a margin impact for the IT companies this year and beyond? How far reaching could it be?

Sandeep Muthangi: Will all other factors being constant, the margin impact on Indian IT companies will be about 40 bps. But usually in times like this, there are levers — like off-shoring and other such stuff — that can act in favour of the Indian IT sector.

But there is a more sinister aspect to this which I would like to highlight. Since 2010, the H1 B Visa is being linked with seemingly unrelated programmes in the US. The 2010 hike was related to the 9/11 programme, in the same manner that the current hike is. The hike being linked to entirely unrelated programmes is the main worry for Indian IT.

We just don't know where the US government will stop. That is the only worry for me. Otherwise, a margin impact of 40 bps can be easily managed by the Indian IT sector.

ET Now: What is the pecking order in the IT stocks right now? Do you see relentless selling, or do you see a knee-jerk reaction?

Sandeep Muthangi: This bit of protectionism and other such moves have been in the price for some time now. To that extent, I only see a modest impact. I see no large-scale sell-off because of this.

In terms of pecking order, IT stocks that are slightly cheaper and those where there is a turnaround story — the likes of Infosys, HCL Tech, Tech M — are my top picks at this point.