Should your portfolio be entirely dependent on India? Looking at the Indian stock market’s performance over the last two years, the answer would be a resounding no.
On 27 September 2024, equity benchmark Nifty 50 was at 26,179. On 28 September 2026, the index ended at 22,780. Thus, the index is down 13% over the last two years.
On 5 January this year, it hit an all-time high of 26,373, but failed to hold altitude. From the record high, the Nifty is down nearly 14%, while year-to-date, it has shed 13%.
Why has Nifty delivered negative returns?
Increased geopolitical risks, US tariff-related uncertainties, and foreign capital outflows amid a lack of AI play in India can largely be attributed to the domestic market’s subdued performance.
A deeper look reveals that elevated oil prices and the earnings-valuation mismatch have been bigger headwinds for the market. Recently, rising US bond yields amid increased prospects of further rate hikes by the US Fed have become a key headwind for emerging markets like India.
“We need not look at the market’s performance as a two-year problem. Even this year, before the US-Iran conflict in January, the market was touching an all-time high. This is mainly a problem triggered by crude oil. With crude at $106 a barrel, if it impacts economic growth, corporate earnings will also take a hit,” V K Vijayakumar, Chief Investment Strategist, Geojit Investments, noted.
“There are two major headwinds: crude oil and US bond yields. It would be irrational to expect FIIs to invest when the US 10-year yield is at 5.2%,” said Vijayakumar.
Should you consider global stocks?
So far this year, while the Nifty is down 13%, the S&P 500 is up 13%. In Asia, Taiwan’s stock exchange has surged 64%, Korea’s Kospi has jumped 60%, and Japan’s Nikkei has risen by 27% year-to-date.
On the surface, it makes sense to have some global stocks in our portfolios. However, when to buy and what to buy remain key considerations.
“Global stocks are good for the portfolio. One can access US small caps through managed funds. Global exposure may be limited to 20% of the portfolio and should not be considered a substitute for domestic exposure,” Joseph Thomas, the head of research at Emkay Wealth Management, says.
Ajay Kumar Yadav, CFP, Group CEO and CIO of Wise Finserv Private Wealth, explained why one should also look at global stocks through a simple example of two scenarios.
Under the first scenario, an India-only portfolio is split equally between the Nifty 50 and Nifty 500, while under the second scenario, a portfolio holding 35% each in the Nifty 50 and Nifty 500, 15% in the S&P 500 and 15% in the Nasdaq-100.
“In the period of two years, the S&P 500 gained around 36% in dollar terms and the Nasdaq-100 around 54%. The rupee also weakened significantly, which added to the value of unhedged US investments when translated back into rupees. Based on these price movements, the India-only ₹1 crore portfolio would have been worth approximately ₹92 lakh, while the 70:30 India-global portfolio would have been around ₹1.08 crore, before expenses, taxes, dividends and tracking differences,” Yadav explained.
The key lesson here is that different markets can be in very different phases at the same time. That is what diversification is supposed to capture.
Yadav further explained that in 2022, the Nasdaq-100 fell by roughly 33%, while the Nifty 50 Total Return Index gained around 5.7%. That year, the India-heavy investor would have looked smarter.
“There will be years when India leads. There will be years when the US does better. At other times, another developed or emerging market may lead both. Geographical diversification is therefore not a tactical bet on America. It is an acceptance that we cannot reliably know which market will lead next,” said Yadav.
Like the past, the future will also be completely different – India could outperform the US, the rupee could strengthen, and the AI trade could weaken. Will that undermine the importance of geographical diversification?
“It would explain why we needed geographical diversification in the first place. Diversification is not about knowing which market will win next. It is about building a portfolio that does not require you to know,” said Yadav.
Tanvi Kanchan, Associate Director, Anand Rathi Share and Stock Brokers, said global exposure deserves a place, but as a structural allocation rather than a reaction to this year’s numbers, as a part of broader asset allocation strategy.
“For most Indian investors, 10 to 20 % in global equities is a sensible range, depending on risk profile. Conservative investors, or those with liabilities entirely denominated in rupees, can sit at the lower end. Investors with a longer horizon, a higher risk appetite or foreign-currency goals such as overseas education can move towards 20%. What investors should avoid is chasing last year’s winner, whether that is a single country, a single theme or a handful of US technology stocks,” said Kanchan.
Santosh Meena, Head of Research at Swastika Investmart, said a measured allocation to global stocks makes sense for most Indian investors, especially when Nifty has struggled to deliver returns this year.
“Adding global exposure (typically 10–20% of the equity portfolio for most investors) can reduce concentration risk, provide access to sectors and companies less available in India (such as pure-play AI, advanced semiconductors or certain healthcare innovators), and offer a natural currency hedge when the rupee weakens. It does not require abandoning the India growth story; rather, it complements a domestic core that still benefits from structural tailwinds in consumption, manufacturing and financialisation,” said Meena.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
