Over the Past Decade, US Stocks Have Outperformed Indian Equities by Roughly 310 Basis Points CAGR

US stocks (S&P 500) dominated the decade from 2013 to 2012, while Indian stocks (Nifty 50) and developed markets also performed well (MSCI DM). New economic fundamentals are emerging, which will significantly alter the growth trends seen over the last decade.

The S&P 500 index of US stocks has delivered astounding returns over the past ten years of 15% CAGR, which is significantly greater than the returns of the Nifty 50 and MSCI DM of 11.9% and 11.4%, respectively. These conclusions are from the Motilal Oswal Private Wealth research titled The Alpha Strategist.

This demonstrates that over the past 10 years, US equity returns have exceeded Indian equity returns by around 310 basis points CAGR. The average annual growth rate over two time periods, or two years, is known as the compound annual growth rate (CAGR).

The Motilal Oswal Private Wealth publication The Alpha Strategist noted that “Winds of Change” are blowing through the world’s financial markets and economies. This suggests that the country’s new economic fundamentals are beginning to take hold and will significantly alter the growth trends seen over the previous ten years.

The 2013–22 performance comparisons of various asset classes are summarized in the Alpha Strategist report, which also offers advice on the best asset allocation for wealth accumulation.

US Equities, which outperformed from 2013 to 22; had negative returns of 10.7% in 2022. This is evidence of the winds of change, where a string of occurrences in CY22 are strongly influencing a change in trend.

Major supply chain disruptions, a spike in gasoline and commodity costs, and later sanctions on Russia as a result of the conflict in the Ukraine spread inflation. Along with other central banks around the world, the US Fed has resorted to raising interest rates at the quickest rate in history in an aggressive move. Equity market valuations have fallen as a result of higher capital costs.

Motilal Oswal Private Wealth’s MD and CEO, Ashish Shanker, summarizes it for the investors: “The recent decade belongs to ‘Growth’ (Earnings Momentum & Quality). The “Value” style underperformed, which is typical of cyclical industries including finance, capital goods, power, and real estate.

There is a chance that some of these cyclical industries will do significantly better in the future than they did in the previous ten years. However, we advise that a stock portfolio should contain a careful blend of both growth and value investments.