You may have heard of reverse brain drain. From the looks of it, it may well be time for a reversal in the nature of capital flows as well. Traditionally, investors in developed markets have chased assets in developing economies such as India for higher returns. And while there have been provisions for Indian investors to invest in assets of developed markets, hardly anyone has taken advantage of those opportunities.

But as it turns out, Indian investors would have been better off investing in US stocks in the past decade. The S&P 500 has beaten India’s Nifty 500 index in the last 10 years after accounting for the depreciation in the rupee.

So, while the Sensex may have reached touching distance of the 40,000-mark, returns from the Indian markets haven’t been all that impressive, when seen in relation to the S&P 500 index, which is made up of the world’s largest corporations.

An investment in the S&P 500 index grew at an annual average rate of 17.11% in rupee terms in the past decade. By comparison, the Nifty 500 index delivered returns of 15.46%, shows a Mint study.

Two things emerge when one scrutinizes the performances. The US market has been in the midst of the longest bull market in its history, despite Indian markets offering ample opportunities for domestic investors. The S&P 500 in dollar terms has, in the past decade, grown an annual 13.51%, thanks in part to the expanding US economy. But a key reason why the S&P 500 index outclasses the Indian market is the Indian currency’s depreciation. In the last decade, the rupee has depreciated approximately 37% against the dollar.

Second, the US market has some global companies and other internet and IT themes such as the Alphabets and Facebooks of the world, that are not listed in India. Many of these themes have had a good run in the last decade, leading to a strong performance in the US market.

While currency risks can work both ways, over a long term, emerging market currencies have generally depreciated.

Having said all this, note that the Indian market has fared better over a three-year and a five-year period. And like investment advisers always say, “Past performance is not a guide for future performance."

Global market dynamics can also change, and factors such as geopolitical risks also tend to influence market returns. “It’s only when the global economy does well that the situation does not seem in our favour. If the Indian economy does well and the rupee shows strength, Indian market returns can be much better, both in the long and short run," said a mutual fund manager.

But, in the end analysis, it does look like it’s time more Indians considered the option of diversifying to assets outside the country.