Local hiring, near-shoring to help soften H-1B impact on Indian IT firms, says JPMorgan's Ankur Rudra

JPMorgan’s Ankur Rudra believes that the latest restrictions on H-1B visas will not be as damaging for Indian IT services companies as initially feared, as firms are already shifting towards local hiring and alternative sourcing models.

“The proclamation clearly, on an overall basis, prices out H-1B visas as a source of labour for the industry on a prospective basis. What’s been helpful is that it has been clarified that it applies only prospectively, and it’s a one-time charge,” said Rudra, who is Head of APAC Telecom & India TMT Research at JPMorgan. He added that companies are likely to “relook at their sourcing strategies to see if they can change the labour source” and increasingly depend on near-shoring and offshoring.

While Rudra estimates that “around 20-50% of on-site employees for IT companies are probably impacted, and about 2-6% of earnings impact on an annualised basis from FY27 to FY30,” he stressed that this is the worst-case scenario and unlikely to play out. “We don’t think the worst case will happen, as companies will change sourcing strategies,” he said.

On the broader IT sector, Rudra noted that headwinds remain in the near term. Weak global demand and uncertainty around tariffs have hurt performance, while potential pricing pressures from artificial intelligence adoption could weigh in the medium term. However, valuations have turned more favourable. “Free cash flow yields and dividend yields have become the cheapest they’ve been in the last eight to ten years, which provides more value in sections of the large-cap space that do pay out dividends,” he pointed out.

Rudra expects demand conditions to remain weak through this year but sees stability returning from calendar 2026 onwards. “We will likely see bottoming out of demand and growth becoming more stable from here on. I don’t expect things to meaningfully worsen,” he said, adding that Q2 performance may be similar or slightly better than Q1.

On the telecom sector, Rudra said the industry continues to function as a “two-and-a-half player market,” with the top two gaining share and the third player depending on government support. He expects average revenue per user (ARPU) to rise by about 10% in FY26 and another 10-15% in FY27, with smaller tariff hikes likely on an annual basis rather than once every two years.