Indian mutual funds faced a massive jolt today, losing nearly ₹13,000 crore in market value across the country’s top 10 information technology (IT) firms, following U.S. President Donald Trump’s executive order to sharply hike H-1B visa fees. The move left investors jittery, eroding valuations across the IT sector.

As of September 19, mutual funds held stakes worth ₹3.41 lakh crore in India’s largest IT players by market capitalisation. Today, this has fallen to ₹3.28 lakh crore, as major IT heavyweights—including Tata Consultancy Services (TCS), Infosys, Wipro, Tech Mahindra, and HCL Technologies—slipped up to 6.5% in early trading.

The Nifty IT index dropped nearly 3% in the first hour of trade today, with all its 10 constituents in negative territory. Tech Mahindra emerged as the top loser, falling as much as 6.5% to ₹1,453.70 on the BSE. The country’s most valued IT stocks—TCS and Infosys—fell around 4%, while HCLTech and Wipro also dropped in a similar range.

The selling pressure was also seen in mid- and small-cap IT companies, with LTIMindtree, Persistent Systems, Mphasis, and Coforge falling up to 4%.

MF holdings in IT titans slump

As per the data, mutual funds held their biggest stake in Infosys at ₹1.31 lakh crore, followed by TCS with ₹62,000 crore in MF investments and HCL Technologies at ₹35,850 crore as of September 19. Other notable exposures included Coforge (₹21,720 crore), Persistent Systems (₹18,900 crore), Mphasis (₹13,240 crore), Wipro (₹11,600 crore), LTIMindtree (₹8,189 crore), and Oracle Financial Services Software (₹4,348 crore).

Triggered by the broad-based sell-off, mutual fund holdings in Infosys dropped by ₹4,626.6 crore today, from ₹1,31,482.1 crore to ₹1,26,855.5 crore. TCS saw a reduction of ₹2,051.9 crore, while Tech Mahindra and HCL Tech witnessed declines of ₹1,679.9 crore and ₹1,153.8 crore, respectively.

Other firms, including Coforge, Persistent Systems, Mphasis, Wipro, LTIMindtree, and Oracle Financial Services, recorded outflows ranging from ₹762 crore to ₹58 crore. Wipro’s MF holdings fell by ₹402.5 crore, LTIMindtree by ₹425.8 crore, and Oracle Financial Services by ₹58.1 crore.

According to ICICI Securities, the $100,000 levy on onsite employees on H-1B visas would imply around a 100 basis points (bps) average headwind on margins and a 6% average impact on earnings per share (EPS), assuming IT companies continue to employ new people on H-1B visas.

Alternatively, if companies pivot towards hiring local U.S. talent while maintaining a favourable employee pyramid (similar to their offshore model), the impact on margins is likely to remain negligible—consistent with the experience during the previous Trump administration, the brokerage said in a report.

“In our view, IT companies would further reduce dependence on the H-1B visa and increase localisation. In the medium term, we believe IT services companies should benefit from this move, as it would trigger higher offshoring to reduce costs,” the report noted.

Another domestic brokerage, JM Financial, said in a report that the first-order impact of higher H-1B fees on only new petitions is likely to be minimal. “Players will likely apply for new petitions only for specific skill-sets where the client is willing to pay for the visa fee, thus making it margin neutral. Further, no impact on existing H-1B visa holders means project delivery will not be affected, which is a positive sign.

Second-order impact—due to wage inflation in the local talent pool or subcontractors—cannot be ruled out, though. “We estimate that higher offshoring can negate the impact of higher wages of local hires, thus making it financially neutral,” it said.