US PERM suspension impact on IT firms overblown, says Kotak Neo

The US suspension of PERM processing for firms like TCS and Infosys will have no immediate revenue impact, says an expert. The move, affecting a small percentage of applications, is a path to residency and not a prerequisite for H-1B work.

US PERM Suspension's Limited Impact on IT Firms

The US administration's suspension of Permanent Labor Certification (PERM) processing for major Indian technology firms like TCS and Infosys will have no immediate impact on corporate revenues, according to Shrikant Chouhan, Head of Equity Research at Kotak Neo. Speaking exclusively with ANI News in Mumbai on Friday, Chouhan addressed market concerns surrounding the immigration move, emphasising that the market's fears were overblown.

"We need to separate the immediate business impact from the long-term immigration concerns," Chouhan noted. "PERM is primarily a pathway to permanent residency and not a prerequisite for every H-1B visa employee to continue working. More importantly, reports indicate that these companies account for 2 per cent to 3 per cent of total PERM applications filed. It is something which is not going to impact revenue immediately, and that is why we are of the view that these IT companies are trading higher."

Broader Market Recovery and Key Drivers

Driven by resilience in the IT sector, Indian equity markets witnessed a strong rebound on Friday, recovering from the previous session's steep 1,000-point plunge in the BSE Sensex to open 400 points higher. Chouhan attributed the broader market recovery to falling US bond yields, reduced global exposure to AI-related stock volatility, and stable domestic market fundamentals.

Positive Outlook for Pharmaceutical Sector

Turning to the pharmaceutical sector, Chouhan welcomed the central government's clarification to cap trade margins at 30 per cent on MRPs for non-scheduled and anti-cancer drugs, which has led to positive gains across healthcare and hospital stocks. Clarifying early market misgivings, he explained, "Earlier it was expected that the effect of this particular cap on the selling MRP of cancer drugs was expected somewhere close to 20 per cent. But now, after this specific clarity, we are of the view that it should be between 2 to 7 per cent kind of impact and not 20 per cent. Barring any new developments from the Supreme Court on Monday, we can see gradual upward activity."

Market Outlook and Investment Strategy

Outlining his expectations for the upcoming trading sessions, Chouhan emphasized that valuations have stabilized near crucial historical support zones. "Investors can enter into the market with a long-term view," he advised. "If there is an investment view, then we should look for investing in large-cap companies at these levels and more on dips."

Chouhan projected a well-defined range for the benchmark index over the near term. "22,150 is going to act as major support, below that we can expect 21,750. If it survives above these levels, then again the market can revisit the levels of 23,000. So, 23,000 and 22,150 should be the range for the market for the next week."

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