India vs global equities: Why investors should not chase higher returns abroad—what 20 years of data shows
If you are looking at global markets and avoiding India based on its recent performance, you may be overlooking its long-term track record.
While diversifying across markets can help spread portfolio risk, chasing today’s best-performing market may not always be the right approach for long-term investors.
Data from a WhiteOak Capital Mutual Fund study shows that the Nifty 500 delivered a 7.7% annualised return over 20 years, making India the second-best performer among the emerging markets, behind only Taiwan.
The study compares 11 emerging markets and the US across one-, three-, five-, 10-, 15- and 20-year periods. Returns are measured in US dollar terms, providing a common basis for comparing markets after accounting for currency movements.
How has India performed over 20 years?
Over the 20-year period, India has been among the strongest-performing emerging markets. The Nifty 500 delivered a 7.7% annualised return, placing it second among the emerging markets covered, behind Taiwan’s TAIEX at 10%.
When the US is included, India ranks third. The S&P 500 delivered an 11.4% annualised return over the same period.
Indexes: India—Nifty 500; Taiwan—TAIEX; Indonesia—JCI; Philippines—PSEi; South Korea—KOSPI; Mexico—S&P/BMV IPC; Brazil—Ibovespa; China—Shanghai Composite; Thailand—SET; South Africa—FTSE/JSE All Share; Malaysia—FTSE Bursa Malaysia KLCI.
What about the 10-year period?
India remained among the top performers over the 10-year period, with the Nifty 500 delivering an 8.4% CAGR. It ranked third among emerging markets, behind Taiwan and Korea.
After including the US, India’s position moved to fourth, as the S&P 500 delivered 15.1%.
Has India’s position changed over five years?
The five-year numbers show a different picture. India’s annualised return was 5.9%, putting it sixth among the emerging markets in the study.
Taiwan and Korea remained ahead, while Mexico, Brazil and South Africa also posted stronger returns. After including the US, India moved to seventh position.
What happened over the last one year?
Over the last one-year period, India recorded its weakest performance. The Nifty 500 delivered a negative 6.2% return. It was the second-worst-performing market, ahead of only Indonesia, which recorded a negative return of 24.1%.
Korea was the standout performer, with a 99.3% gain, followed by Taiwan, Brazil, Thailand, Mexico and South Africa. The US also delivered a positive 19.6% return.
Yet the one-year leaders do not necessarily remain long-term leaders. For example, Korea delivered the highest return in the last one year, but its 20-year annualised return was lower than India’s.
What does this mean for long-term investors?
The data shows why chasing the market that has delivered the highest recent return may not necessarily work for a long-term investor.
Over the last one year, Korea has emerged as the best-performing emerging market, with a 99.3% return, followed by Taiwan, Brazil, Thailand, Mexico, and South Africa.
However, the rankings look very different when the investment horizon is extended to 20 years. Taiwan leads the emerging markets with a 10% annualised return, followed by India, Korea, China and Thailand.
Even the US, which has remained among the top three performers across the years, was not the top-performing market over the last one-year period. Its 19.6% return placed it below Korea, Taiwan, Brazil, Thailand, Mexico and South Africa.
However, diversifying across markets can help investors avoid relying on the performance of a single market.
Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.
