Indian companies listed on U.S. exchanges as American Depositary Receipts (ADRs) have delivered lackluster returns over the past year, with technology stocks hit hardest by sector weakness and lack of confidence amongst investors. The underperformance reflects broader challenges in the global IT services industry.
Tech ADRs trail U.S. peers
Infosys and Wipro, two of India’s largest IT services firms, posted double-digit negative returns in the last 12 months. The declines followed a broader sell-off in global tech stocks, accelerated by IBM’s 25.5% plunge after weaker-than-expected second-quarter earnings. IBM’s results triggered a reassessment of the sector’s growth prospects. Meanwhile, U.S. tech giants like Nvidia, Alphabet, and Apple recorded positive returns over the same period.
HDFC Bank and ICICI Bank, two of India’s largest private lenders, also underperformed. Of the six Indian ADRs currently listed, only Dr. Reddy’s Laboratories managed to outpace its tech counterparts—though it still missed fourth-quarter earnings estimates. Data for Tata Motors, listed on the NYSE, was unavailable.
Local markets offer partial cushion
While U.S.-listed shares struggled, their domestic counterparts fared relatively better. The gap stems from factors like the rupee’s depreciation, as well as differences in trading hours, liquidity, and investor sentiment between Wall Street and Dalal Street.
Tata Motors is a rare exception. Its domestic shares have performed well, even as its ADR remains difficult to assess. The contrast highlights how local market conditions can soften the impact of global volatility.
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For Dr. Reddy’s, the divergence between its ADR and local shares grew sharper after the company temporarily halted commercial supplies of its generic semaglutide due to an issue with the drug’s active pharmaceutical ingredient (API). Torrent Pharmaceuticals later recalled select batches of Semalix injection pens manufactured by Dr. Reddy’s.
Short-term fluctuations, like the brief rally triggered by speculation around a U.S.-Iran deal, have done little to reverse the broader trend. Despite stable earnings for many of these companies, their ADR prices have continued to slide.
This isn’t just about where a company is listed. The real story lies in the fundamentals—whether a business can weather global headwinds while maintaining growth. Indian ADRs face challenges, including currency risks and regulatory hurdles in foreign markets. The ability of these companies to execute will determine whether their ADRs can regain investor confidence.
Investors, meanwhile, are left weighing the trade-offs: the liquidity and visibility of U.S. listings against the relative resilience of home markets. ADRs offer easier access for international investors, but they also come with higher volatility and currency risks. Domestic listings benefit from local investor familiarity and alignment with India’s economic growth. The gap between the two may not close anytime soon, as global macroeconomic conditions and sector-specific challenges continue to influence investor preferences.
