Impact of Indian Election Results on Indian ADRs and ETFs

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The Impact of India’s Election Results on Investments

India’s election results that are developing Tuesday have had immediate impacts on a number of investments related to the country’s economy. Prime Minister Narendra Modi looks poised for a third term leading the country, but his party unexpectedly lost its majority and will need to rely on coalition partners to form the government. American depository receipts (ADRs) of Indian companies and India-focused exchange-traded funds (ETFs) trading in the U.S. fell as election results trickled in.

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Modi Claims Victory, But Party Loses Majority

As India’s election results continue to unfold, Prime Minister Narendra Modi has claimed victory for what could be his third consecutive term leading the country. However, Modi’s party, the Bharatiya Janata Party (BJP), unexpectedly lost its majority in the elections. This means that the BJP will now have to rely on support from coalition partners to form the next government. The unexpected outcome of the election has caused concern among investors, leading to a significant impact on various investment vehicles.

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ADRs of Indian Companies Take a Hit

India’s stock market suffered early Tuesday as election results revealed worse-than-expected performance for Modi’s allies. The markets were down nearly 6% by the end of trading, erasing much of this year’s early gains. This decline also affected American depositary receipts (ADRs) of several Indian companies trading on U.S. exchanges. ADRs of banks like ICICI Bank (IBN) and HDFC Bank (HDB) each fell more than 9% on Tuesday afternoon in U.S. trading.

Other major Indian companies that trade on U.S. exchanges, such as Dr. Reddy’s Laboratories (RDY) and Infosys (INFY), experienced a slight drop of under 1%. Wipro shares (WIT) were also down by approximately 1.7%. The election results have clearly had a negative impact on the stock prices of these companies, reflecting investor concerns about the political uncertainty in India.

Indian ETFs Follow Suit

As India’s markets suffered from the election results, several India-focused ETFs also experienced significant declines. The iShares MSCI India ETF (INDA), one of the largest with over $10.6 billion in assets under management (AUM), was down about 6% at $51.46 by early afternoon on Tuesday. Other large ETFs, including the Invesco India ETF (PIN), iShares MSCI India Small-Cap ETF (SMIN), and Franklin FTSE India ETF (FLIN), all fell by more than 6%. The WisdomTree India Earnings Fund (EPI) tumbled almost 8%, reflecting the overall negative sentiment among investors following the election results.

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The recent election results in India have had a significant impact on various investments related to the country’s economy. While Prime Minister Narendra Modi has claimed victory for a potential third term, his party’s loss of majority has raised concerns among investors. The decline in stock prices of Indian companies and ETFs trading in the U.S. reflects the uncertainty and volatility surrounding the political situation in India. As the situation continues to evolve, investors will closely monitor developments and adjust their investment strategies accordingly.

Overall, the election results have highlighted the importance of political stability and its impact on financial markets. It serves as a reminder for investors to stay informed and adapt to changing circumstances to protect their investments in an increasingly interconnected global economy.

News Desk

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