More worrying are not only the lower returns, but also the higher risk. India has seen deeper declines and lower Sharpe ratios, meaning investors accepted more volatility and pain for less reward. In contrast, US indices delivered superior CAGR, stronger rolling returns and significantly better risk-adjusted results.For a global allocator – whether a pension fund, a sovereign wealth fund or an institutional CIO – the implication is simple:
There is no obligation at the portfolio level to allocate incremental capital to India.
Foreign players in the Indian market have been confined to their homes for quite some time now. Their exit is crucified with money from Indian retail investors that ended up in equities through the SIP route. If these inflows are also affected by the low returns or dismal performance of the Indian institutional investors, the government may face a difficult situation to resolve the potential problem. It must delicately address the issue of capital – both domestic and foreign.
Capital today is global, flexible and ruthlessly comparative. When US markets offer:
- Higher USD returns
- Better Sharpe proportions
- Lower withdrawals
- Deeper liquidity and currency safety
India needs to provide explicit incentives to stay relevant.
These incentives cannot be narrative. They must come via:
- Lower tax and transaction friction
- Greater currency stability
- Regulatory predictability
- Market structures that improve risk-adjusted returns
The real risk for India is not capital outflows.
It is capital indifference.
If India wants sustainable foreign participation, it must compete where global capital actually decides: the USD return per unit of risk.
Comparative Performance Snapshot (USD Terms)
Source: Internal SAMCO research. All returns calculated in USD terms.
(The author is Founder and CEO, SAMCO Group)
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