NiftyIT Index continues to underperform the market despite some uptick seen in recent months. Owing to weak economic data coming out of the US, war-related geopolitical uncertainty and AI-led disruption; share prices of Indian IT services companies face downward pressure. And a few recent developments have aggravated the risks. First one is the increasing scrutiny over immigration visas. On Tuesday, the US Department of Labor informed that it has suspended Permanent Labour Certification Filings- widely known as PERM-of Cognizant as the US authorities investigate alleged fraud in the immigration program.

PERM is a key route for employers to get employment-based green cards for the foreign workers, whom they bring in to the US for executing project work. Green card enables a foreign worker to permanently reside in the US for work, which can eventually lead to citizenship of the North American country.

With the US suspending PERM filings of Cognizant, the tech major will no longer be able to apply for permanent residency for its workers under the green card route. Industry watchers are of the view that the investigation will not be limited to Cognizant alone and all major Indian IT services providers are likely to face the scrutiny in coming days. This is just the first warning shoot fired by the American authorities.

Such development is bound to spook the market and it has. Nifty IT Index was among the major losers in Indian market on Wednesday with more than 3 per cent fall. All major IT stocks including TCS, Infosys, Wipro, and a host of mid-tier IT firms have faced selling pressure. Now, the question arises that why market is so nervous and how is it different from restrictive measures introduced by the Trump administration on H1B visa route?

Firstly, H1B visa is a temporary visa program under which technology firms take engineers to the US for a certain period of time for executing project work. In contrast, green card is a permanent residency route with wider implications because this allows really talented individuals to become the US citizens and contribute towards the US technology dominance in the world. Interestingly, most high-flying Indian origin CEOs in US have got the citizenship through this route. Earlier, the Trump administration has made changes to the green card application methods by asking all eligible people to go back to their country of origin and apply from there through the American consulates. Against this backdrop, the suspension of PERM filings of Cognizant indicates that the US is actively discouraging Indian tech professionals to come to the US- whether through H1B visa route or green card one.

This raises some fundamental question on the operating models of Indian IT companies. For years, US has been the biggest market for most IT firms with more than 30 per cent of revenue coming from here. And the operating model has been bringing professionals from delivery centres like India to the US to work on client locations. Now, it has to fundamentally change as the US tightens all forms of immigration.