Ignore India at own loss, Nifty numbers say loud and clear

The Nifty outperformed its peers despite the rupee being the worst performer against the dollar in the past decade. Photo: Mint
The Nifty outperformed its peers despite the rupee being the worst performer against the dollar in the past decade. Photo: Mint


  • Nifty data shows what makes India a market ‘hard to ignore’ for foreign investors.

MUMBAI : Indian stocks outshone most major global markets over the past decade, reinforcing the view that global investors can’t afford to ignore India if they desire world-beating returns.

Dollar returns of the National Stock Exchange’s Nifty index have significantly outperformed leading global indices, including Germany’s Dax, UK’s FTSE, Hong Kong’s Hang Seng Index and Shanghai Composite Index over the past decade.

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In the 10 years to mid-October this year, Nifty returns stand at 124% against 54.5% for the Dax and 33.8% for China’s Shanghai Composite Index. The UK’s FTSE and Hang Seng generated negative returns of 8.4% and 12.8%, respectively.

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Only the US market has delivered higher returns than the Nifty, but that, too, is primarily because of the strong dollar. The dollar, the primary currency for global trade, has been on a tear this year because of the aggressive interest rate hikes by the US Federal Reserve and investors rushing to the safety of dollar assets during times of economic uncertainty. The strong dollar is also wreaking havoc globally and driving down investors’ returns on assets outside the US. However, the rupee has held up better than many emerging market currencies because of India’s faster economic growth.

“Money chases growth, and India happens to be a high-growth market," said Siddarth Bhamre, executive vice-president (research head) at Religare Broking, explaining the Nifty’s relatively superior dollar returns. “The Indian economy has seen the share of exports going higher, leading to India commanding higher valuations."

The Nifty outperformed its peers despite the Indian currency being the worst performer against the dollar in the 10-year period. The rupee depreciated 60% versus the dollar, against the euro’s 23% depreciation and the pound’s 27% decline. The yuan was pegged at 6-7 to a dollar while the Hong Kong dollar moved in a narrow 7.75 -7.87 during the period.

Nilesh Shah, managing director and chief executive of Kotak Mahindra Asset Management, attributed the superior market performance to the “crucial period between 2014 and 2022, which saw India’s economy grow from being the 10 largest to the fifth largest; India’s market share in global GDP rising from 2.6% to 3.2%; our global share of exports and trade services rising from 2% to 2.2%; and more importantly, India’s foreign direct investment share increasing from 2.1% to 6.7%."

Shah said India’s outperformance will continue with its earnings growth, governance standards and commitment to environmental standards being superior to those of other EMs, making it a market “hard to ignore" for foreign investors.

While the MSCI India index’s annualized gross returns over a 10-year period were 7.39%, those of MSCI EM were just 1.42%, while MSCI US’s were 11.66%.

However, the annualized returns of the Nifty index without converting to dollars still exceed US returns.

In terms of GDP, too, India is expected to grow faster, given its reliance on the domestic market rather than the export-oriented growth seen in countries such as Taiwan and China.

“Being domestically driven, our economy tends to be insulated at times of global slowdown, which affects export-led economies more," said Madan Sabnavis, chief economist at Bank of Baroda. “To that extent, India is decoupled, which shows in growth projections."

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