INDIA WINS!!!

Large global investors from developed markets are increasingly looking to invest in emerging markets for the longer term. For them, the return they seek is dependent on the performance of the underlying asset and the exchange rate of the currency. Exchange rate risk can be mitigated by hedging the currency.

India is one such destination among emerging markets where both short-term and long-term investors from developed economies recommit their interest to invest. For them, placing trust in Indian markets has always made economic sense in the longer term despite rupee depreciation.

Since 2000, average annual depreciation of Indian Rupee is around 2.62%. Even after considering currency depreciation, Indian equity markets outperformed their US counterparts by a decent 4% pa !

While it is evident that Indian markets have outperformed U.S. markets for the last 2 decades, performance of Indian markets in the post COVID period also reinstates the fact that India is a safe destination for Global investors.

Observations:

1. India has been the best performing market globally – delivering 43% absolute return from pre Covid levels until now.
2. From the lowest point of Covid correction, India has delivered 160% as against 70% for China & Mexico, 116% for Brazilian markets and 120% for U.S. markets.
3. Even comparing against developed markets India has outperformed by huge 27% (from pre Covid levels) against average returns of 16% for U.S, Germany, Australia & Canada.

INR against USD ($) has depreciated ~ 8% since Feb 2022 till today.

Even after factoring ~8% depreciation of INR against USD since COVID as highlighted above, Indian markets delivered 35% return in absolute terms, an alpha of 7% over U.S. markets!