Diversifying Horizons: Why Indians should consider investing abroad despite a strong domestic market
For Indian investors, this principle is just as relevant for country diversification as it is for asset diversification. While investing in India alone can yield strong returns driven by a robust economy, expanding into global markets offers unique benefits that domestic equities alone would not be able to offer.
Many Indian investors are tempted to ask, “With India’s rapid growth, why should I consider markets abroad?” Though India’s growth story has indeed been compelling, relying exclusively on one market limits both risk-adjusted returns and true diversification. Over-relying on any one economy makes a portfolio vulnerable to country-specific risks, while global diversification can provide a critical buffer. To understand why this works, it’s helpful to dispel a common myth: there is no consistent correlation between a country’s economic growth and its stock market returns.
China’s case illustrates this well—despite being the fastest-growing economy for much of the past three decades, China’s stock market has underperformed compared to global averages, even taking out the last 4/5 years from the equation. From that standpoint, S&P 500 which is the primary benchmark for U.S. has outpaced India’s primary benchmark stock market index NIFTY 50, even though India’s economic growth rate has been roughly three times that of the United States over the same period.
India – US – Economic Growth vs Shareholder Wealth Compounding
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