So, all of us love seeing these double-digit returns on our Nifty 50 investments, proper? Apna Sensex and Nifty are just like the darlings of the Indian inventory market. However just lately, I used to be digging into some numbers, and it made me rethink how we measure our funding success.
We often pat ourselves on the again how a lot our portfolio has grown in Rupees. “Wow, lakhs have changed into crores!” However right here’s the factor: what if I instructed you that these spectacular numbers is likely to be hiding a not-so-pleasant fact?
The Greenback Story: Why Your International Buying Energy Issues
See, the world doesn’t run on Rupees alone. Once we discuss shopping for energy on a worldwide scale, the US Greenback nonetheless reigns supreme. And over the past decade, the Indian Rupee has been steadily shedding pounds towards the mighty Greenback. Rupaiya thoda kamzor ho raha hai, doston.
Let’s have a look at some exhausting numbers.
Over the previous 10 years (2015-2025), the Nifty 50 gave some stable returns, proper? Completely! However whenever you convert these returns into USD, the story adjustments. All of a sudden, the S&P 500 (the massive daddy index of the US inventory market) appears to be like far more spectacular.
| Index | 10-Feb-15 | 10-Feb-25 | % Absolute Return | % Annualized Return |
|---|---|---|---|---|
| Nifty 50 | 8,805 | 23,381 | 165.60% (INR) | 10.25% (INR) |
| S&P 500 | 2,055 | 6,066 | 195.20% (USD) | 11.43% (INR) |
The Math, Made Easy (As a result of I Hate Difficult Jargon Too!)
Let’s say you invested in Nifty 50 ten years in the past. Again then, the Nifty was round 8,805. Now it’s at 23,381. That’s an awesome bounce of 165.6%.
However right here’s the catch:
- 2015: US $1 was roughly Rs. 61.65
- 2025: US $1 is now roughly Rs.87.50
- Between 2015 and 2025: INR has develop into weaker by about 42%.
| 12 months | Trade Fee (1 USD to INR) |
|---|---|
| 2015 | 61.649 |
| 2025 | 87.50 |
Which means the Rupee has depreciated considerably in these final 10 years. Now, whenever you calculate your Nifty returns in USD, the precise beneficial properties are a lot decrease.
Instance Time: Our Story!
Think about you invested Rs.1 lakh within the Nifty 50 in 2015. Superior!
- In INR phrases, it grew to Rs.2.66 lakhs (about 2.66 occasions). Not dangerous, hai na? (Absolute 165.6% and Annualized 10.25%).
- However in 2015, your Rs.1 lakh was price about $1,622 ( = 100000 / 61.65).
- At the moment, that Rs.2.66 lakhs is price solely round $3,043 ( = 266000 / 87.5).
- In USD phrases, the expansion is simply about 1.88 occasions in 10 years (Absolute 87.1% and Annualized 6.46%).
| Index | Nifty 50 (INR) | Nifty 50 (USD) |
|---|---|---|
| Absolute | 165.6% | 87.1% |
| Annualized | 10.25% | 6.46% |
So, when you suppose you’ve greater than doubled your cash (2.66x) , your precise achieve in USD phrases is considerably much less (1.88x).
The S&P 500 Benefit
Now, let’s throw the S&P 500 into the combo. Over the identical interval, the S&P 500 has not solely given improbable returns in USD, however it has additionally benefited from the Greenback’s power. Greenback robust, toh returns bhi robust!
| Index | 10-Feb-15 | 10-Feb-25 | % Absolute Return | % Annualized Return |
|---|---|---|---|---|
| S&P 500 | 2,055 | 6,066 | 195.20% (USD) | 11.43% (INR) |
Why Ought to You Care?
Okay, so why am I ranting about all this? As a result of as Indian buyers, we have to suppose past simply Rupee returns.
- International Aspirations: Are you planning to ship your youngsters overseas for research? Dreaming of a European trip? Pondering of investing in worldwide actual property? All these items require {Dollars} (or Euros, or Kilos, however you get the purpose). Even when your aspirations aren’t of overseas, nonetheless a weak forex (INR) will damage you because it creates inflationary pressures on our imports. Keep in mind, Indian has an enormous commerce deficit as we’re internet importers.
- Actual Wealth: If the Rupee retains weakening, your wealth isn’t rising as a lot as you suppose, particularly with regards to world buying energy.
Recommended Studying: (1) You’ll be able to learn right here about what makes a forex robust. (2) You also needs to learn this story in regards to the Korean forex (Received) and what classes we Indians can be taught from it. (3)
So, What’s the Resolution? Suppose International
I’m not saying ditch the Nifty 50. It’s nonetheless an awesome index. However think about diversifying a portion of your portfolio into worldwide property, particularly these denominated in USD.
- S&P 500 ETFs: These are a simple option to get publicity to the US inventory market.
- US Shares: Analysis and spend money on particular person US firms that you just consider in.
- Worldwide Mutual Funds: Many Indian mutual funds supply publicity to world markets.
Conclusion
Don’t get me mistaken, I’m a proud Indian investor. However I additionally consider in being good and life like. We have to perceive the impression of forex fluctuations on our investments.
Consider it this manner: In case your investments aren’t outpacing the Rupee’s depreciation, your actual wealth may not be rising as a lot as you suppose.
So, let’s begin pondering globally, make investments neatly, and safe our monetary future, it doesn’t matter what the Rupee does. What are your ideas on this? Let me know within the feedback beneath!
Disclaimer: I’m not a monetary advisor, and this isn’t monetary recommendation. Please do your individual analysis and seek the advice of with a professional monetary advisor earlier than making any funding choices.
Recommended Studying: I wrote this weblog put up in November’2024 when Rupee breached the Rs.84 ranges. I’ve additionally remembered our late PM Dr. Manmohan Singh on how he used to nonetheless be ridiculed by the opposition in 2014 when the Indian rupee was quite a bit stronger at Rs.63 ranges.
