If you are looking at global markets and avoiding India based on its recent performance, you may be overlooking its long-term track record.
While diversifying across markets can help spread portfolio risk, chasing today's best-performing market may not always be the right approach for long-term investors.
Data from a WhiteOak Capital Mutual Fund study shows that the Nifty 500 delivered a 7.7% annualised return over 20 years, making India the second-best performer among the emerging markets, behind only Taiwan.
The study compares 11 emerging markets and the US across one-, three-, five-, 10-, 15- and 20-year periods. Returns are measured in US dollar terms, providing a common basis for comparing markets after accounting for currency movements.
Over the 20-year period, India has been among the strongest-performing emerging markets. The Nifty 500 delivered a 7.7% annualised return, placing it second among the emerging markets covered, behind Taiwan’s TAIEX at 10%.
When the US is included, India ranks third. The S&P 500 delivered an 11.4% annualised return over the same period.
India remained among the top performers over the 10-year period, with the Nifty 500 delivering an 8.4% CAGR. It ranked third among emerging markets, behind Taiwan and Korea.
After including the US, India's position moved to fourth, as the S&P 500 delivered 15.1%.
The five-year numbers show a different picture. India's annualised return was 5.9%, putting it sixth among the emerging markets in the study.
Taiwan and Korea remained ahead, while Mexico, Brazil and South Africa also posted stronger returns. After including the US, India moved to seventh position.
Over the last one-year period, India recorded its weakest performance. The Nifty 500 delivered a negative 6.2% return. It was the second-worst-performing market, ahead of only Indonesia, which recorded a negative return of 24.1%.
Korea was the standout performer, with a 99.3% gain, followed by Taiwan, Brazil, Thailand, Mexico and South Africa. The US also delivered a positive 19.6% return.
Yet the one-year leaders do not necessarily remain long-term leaders. For example, Korea delivered the highest return in the last one year, but its 20-year annualised return was lower than India's.
The data shows why chasing the market that has delivered the highest recent return may not necessarily work for a long-term investor.
Over the last one year, Korea has emerged as the best-performing emerging market, with a 99.3% return, followed by Taiwan, Brazil, Thailand, Mexico, and South Africa.
