The quiet death of ADRs: Why investors no longer need Wall Street’s window into India

HDFC Bank episode shows, ADRs remain a flashing alarm bell for FPI sentiment.In the early 2000s, Indian markets were marked by sharp information asymmetry, and remained relatively isolated from their global peers. For foreign investors at the time, these US dollar-denominated certificates traded in American exchanges opened a critical but often congested lane connecting to Dalal Street.Switch to present—the landscape has transformed.

Multiple new routes have opened up for stock buyers, broadening foreign access, deepening liquidity, and wiring domestic markets far more tightly into global capital flows. Consequently, Mumbai now dictates price discovery, sidelining New York, with the allure of ADRs fading along the way.Sample this: ADRs of Infosys, the first Indian company to issue them, traded at a 32% premium between 2001 and 2008.

It has since slipped into a discount, while ICICI Bank ADRs, which used to have a 9% premium, has converged to parity with its domestic shares. The trend mirrors across other large-cap ADRs, suggesting that the need for offshore access to these stocks has faded.Experts say high ADR premiums typically reflect restricted domestic access or limited liquidity.

With direct access to Indian markets cumbersome in the early 2000s, ADRs carried a scarcity premium, along with a convenience fee for trading in US dollars on US exchanges.“For decades, fragmented KYC norms and rigid capital controls made US depositary receipts necessary as liquidity bridges,” Anubhav Ghosh, partner of financial regulatory practice at Trilegal, said.That has since changed. The Securities and Exchange Board of India’s (Sebi) liberalized FPI regime has streamlined onboarding into a single-window, risk-based process.