S&P 500 vs Nifty 50: Why ₹1 Lakh in the US Earned More for Indian Investors Despite Lower Returns
A recent analysis by Vested Finance highlights that the Indian rupee has been steadily weakening against the dollar for over a decade, depreciating by approximately 3% annually. In 2025, the rupee fell by 6%, reaching a record low of 91. Although it has since recovered slightly, the current exchange rate
As Indian investors continuously seek profitable avenues for their capital, a recent analysis from Vested Finance sheds light on an intriguing comparison: the S&P 500 and Nifty 50 indices. Despite the Nifty 50 exhibiting higher ten-year returns than the S&P 500, it is the Indian investors holding equity in the American index who saw greater wealth accumulation. This trend is largely attributed to the depreciating Indian rupee, which has affected investment outcomes over the past decade.
The report from Vested Finance indicates that the Indian rupee has been weakening against the dollar, losing approximately 3% of its value annually for over ten years. By 2025, the rupee had plummeted by 6%, hitting a record low of 91 against the dollar. This depreciation intensifies the gains made by Indian investors in dollar-denominated assets, such as the S&P 500. While the Nifty 50 index has delivered impressive returns, the dollar's appreciation has counteracted some of these gains when converted back into Indian rupees.
For instance, if an investor had placed ₹1 lakh in the S&P 500 a decade ago, they would have converted their money into dollars at a much lower exchange rate than what it is today. As the S&P 500 has outperformed many indices globally, the value of those investments burgeoned faster compared to comparable domestic investments, especially when factoring in the weakening rupee. The outbound flow of Indian capital seeking stability and better returns in foreign markets has crescendos, and this analysis offers essential insights for those deliberating on international investments.
Industry experts underline that the divergence between the two indices extends beyond mere numbers. "While many may consider local markets a safer bet, the reality is that global market exposure allows for diversification and hedging against local currency fluctuations," noted Anil Sharma, a financial analyst based in Mumbai. "Investors must look at the bigger picture, which increasingly includes global trends that influence local economies."
Moreover, the analysis reveals that inflationary pressures and local economic uncertainties have compelled many to seek safer havens abroad. With investors keenly aware of global economic shifts, there has been a notable uptick in investment flows towards the S&P 500. This trend is not only illustrated by favorable performance metrics but also backed by a growing understanding and acceptance of overseas equities amidst Indian investors.
Despite the strong performance of the Nifty 50, especially amidst economic reforms and growth sectors like technology and pharmaceuticals, the constant depreciation of the rupee suggests that the index may not provide the same level of returns when considered in a global context. As the exchange rate fluctuates, the true benefits derived from a domestic index may not be enough to outweigh the solid performance of foreign counterparts, especially when the dollar value grows.
In conclusion, as Indian investors navigate a dynamic market landscape, understanding the implications of currency trends and global market performance will be crucial for making informed investment decisions. The recent insights from Vested Finance emphasize not only the comparative performance of these major indices but also highlight the broader economic narratives that influence investor behavior in India.
