S&P 500 vs Nasdaq 100: Which global index fund is right for Indian investors seeking international market exposure?

Indian investors looking to diversify beyond domestic mutual funds have two prominent US stock market indices to consider: the S&P 500 and Nasdaq 100. While both provide exposure to some of the world’s largest companies, they differ in diversification, sector concentration and investment risks.

The US accounts for more than 60% of global stock market value, while companies represented by the S&P 500 alone account for over 40%, according to the July-September 2026 edition of The Tortoise Lens, a quarterly magazine published by PPFAS.

In the report, Akshay Falgunia, Fund Manager at PPFAS GIFT, explains why Indian investors should consider international diversification, which indices offer suitable exposure and how much of their equity portfolio they could allocate overseas.

S&P 500 vs Nasdaq 100: Which offers better diversification?

The S&P 500 comprises approximately 500 leading US companies across multiple sectors. According to Falgunia, these companies collectively represent more than 40% of global stock market value, making the index a broad-based option for international diversification.

Several companies in the index also generate substantial revenue outside America, providing investors with exposure to businesses operating across international markets.

The Nasdaq 100, meanwhile, comprises 100 of the largest non-financial companies listed on the Nasdaq Stock Market. It has a greater concentration in technology and biotechnology businesses.

Falgunia identifies the S&P 500 as a starting point for investors seeking broad international exposure. For those looking for greater exposure to innovation and comfortable with higher volatility, he highlights the Nasdaq 100.

However, investing internationally does not automatically guarantee diversification. The report cautions against concentrating an entire overseas portfolio in artificial intelligence or another popular investment theme.

An investor who invests internationally only to hold a handful of technology companies may remain exposed to substantial sector-specific risks.

Why should Indian investors diversify beyond domestic mutual funds?

An investor holding Indian large-cap, mid-cap and small-cap mutual funds may be diversified across several companies and sectors. However, the entire portfolio remains exposed to the same economy and currency.

According to Falgunia, international investments can reduce geographical concentration while providing access to businesses that have limited representation in Indian markets.

The report identifies advanced semiconductor manufacturing, innovative pharmaceuticals and artificial intelligence infrastructure as sectors where several leading businesses are based outside India.

It also examines the relationship between Indian and global equities through the three-year rolling correlation of monthly price changes in the NSE 500 and MSCI World indices.

According to the report, this correlation has generally remained below 0.7 over much of the past 25 years, suggesting that Indian and developed-market equities do not always move together.

However, correlations can increase during major global shocks, reducing the benefits of diversification. International investments may also help investors planning future expenses in foreign currencies, such as overseas education or travel.

How much should Indian investors allocate to global index funds?

According to Falgunia, investors beginning their international investment journey can consider allocating around 10% of their equity portfolio to overseas investments.

He suggests that this provides an opportunity to understand how global markets behave and how international investments interact with existing Indian holdings.

Over time, investors comfortable with international markets could consider increasing their overseas allocation to approximately 25% to 33% of their equity portfolio.

For example, an investor with an equity portfolio worth ₹10 lakh would invest ₹1 lakh internationally at a 10% allocation. Increasing this allocation to 25% would mean holding ₹2.5 lakh in overseas equities, while a 33% allocation would translate into approximately ₹3.3 lakh.

These are broad allocation suggestions from the report, not fixed recommendations for every investor.

Falgunia also recommends beginning with broad-based passive funds and ETFs before moving into individual overseas stocks or concentrated investment themes.

Are there better options beyond the S&P 500 and Nasdaq 100?

While both indices provide exposure to US-listed companies, investors seeking wider geographical diversification can explore global indices.

According to the PPFAS report, the MSCI All Country World Index covers approximately 85% of global stock market value through around 2,600 companies.

The MSCI ACWI Investable Market Index offers broader coverage, representing approximately 99% of global market value through nearly 9,000 companies.

Both indices include developed and emerging markets.

The report also identifies GIFT City as a route for Indian investors seeking international passive investment products, particularly as overseas investment limits have restricted fresh subscriptions into several international mutual fund schemes.

For investors primarily seeking broad US equity exposure, the S&P 500 offers greater sector diversification. The Nasdaq 100 provides a more concentrated exposure to technology and innovation, accompanied by potentially higher volatility.

The choice ultimately depends on whether the objective is broad international diversification or greater exposure to technology-driven businesses.