India ETFs Retreat on Rising Concerns Over Bad Loans

Indian markets and country-specific ETFs retreated Friday after Yes Bank Ltd. and Dwan Housing Financing Corp. shares plummeted and dragged down the whole financial sector.

On Friday, the iShares MSCI India ETF (BATS: INDA) declined 2.7%, PowerShares India Portfolio (NYSEArca: PIN) decreased 2.8%, WisdomTree India Earnings ETF (NYSE: EPI) fell 2.6% and Franklin FTSE India ETF (NYSEArca: FLIN) dropped 2.6%.

Yes Bank shares retreated to their lowest level since 2016 on Friday after India’s banking regulator refused to extend the chief executive officer’s tenure while Dewan shares plunged 43% for its steepest loss on record, Bloomberg reports.

The sudden pullback revealed investors’ anxiety over Indian financial shares after Infrastructure Leasing & Financial Services Ltd. defaulted on its debt and shook confidence in the sector.

“IL&FS’ problem and Yes Bank’s issues are impacting every financial stock in the market,” A K Prabhakar, head of research at IDBI Capital Market Services Ltd., told Bloomberg. “Leveraged positions are being reduced.”

The markets may have overreacted after some mutual funds dumped exposure to bolster cash positions before an expected tightening of market liquidity in September.