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The time-resolved photo-induced magneto-optical response of water soluble cadmium telluride (CdTe) colloidal quantum dots (QDs) is studied in the spectral range across the first exciton (1S3/21Se) transition at room temperature without external magnetic field. Spectral dependence of the Faraday ellipticity reaches an extremum near the first exciton transition energy, while the Faraday rotation shows a sign reversal, which indicates that the spectral dependence of photo-induced Faraday effect evolves from a diamagnetic to a paramagnetic behavior during the exciton spin relaxation process in CdTe QDs.