Investing only in India? Saurabh Mukherjea of Marcellus explains what you’re missing out on | Stock Market News

Dalal Street and Wall Street often move in different directions, and that’s an opportunity for investors. The Indian and US markets may deliver similar long-term returns, but their paths aren’t the same. That’s where diversification works in your favour, according to Saurabh Mukherjea, founder of Marcellus Investment Managers.

As per the expert, Indian investors focusing solely on domestic markets might be missing out on valuable diversification benefits. He believes that while the Indian and US stock markets have delivered similar long-term returns, their divergent movements create opportunities for reduced volatility and enhanced gains. Mukherjea argues that building a balanced portfolio with exposure to both markets can offer a “free lunch” in terms of lower risk without compromising returns.

Indian and US Markets: Different Paths, Similar Returns

Mukherjea highlights that while the US stock market has delivered consistently strong, earnings-led returns, these gains are largely independent of GDP growth. The US market ranks among the top performers globally over 10- and 20-year periods, with returns comparable to India. However, despite these similarities, the correlation between the two markets remains relatively low. According to Mukherjea, this low correlation is precisely why Indian investors stand to benefit from diversification.

“The US market’s returns have little to do with GDP growth, but its consistent earnings-led performance makes it a strong addition to an Indian portfolio,” said Mukherjea.

Low Correlation Boosts Diversification Benefits

What makes the US market particularly attractive for Indian investors is its low correlation with Indian equities, Mukherjea explained. He points out that five-year rolling correlations between the S&P 500 and Nifty 50 typically range between 40 and 70 per cent. This low correlation means that while both markets may react to global events, India tends to fall harder during

On the other hand, local events such as the IL&FS crisis in 2018 or the US rate hike cycle in 2022 hit one market more than the other, creating opportunities for portfolio diversification, he noted.

Real-World Examples of Divergence

Mukherjea illustrated how diversification can protect portfolios during market stress. During the COVID-19 pandemic, both the Indian and US markets suffered, but India underperformed significantly, worsened by rupee depreciation. Similarly, while the US rate hikes in 2022 pressured American equities, while the Indian market remained relatively resilient.

“Despite delivering similar long-term returns, the two markets behave differently during periods of stress, making diversification particularly effective,” Mukherjea added.

Marcellus’ Global Compounders Portfolio (GCP)

Mukherjea pointed out to Marcellus’ Global Compounders Portfolio (GCP) as an example of effective diversification. The GCP allocates 80 per cent to US equities and the remaining portion to high-quality stocks from Europe and Canada. According to Mukherjea, the GCP has outperformed the S&P 500 since its inception in October 2022 while maintaining a 40 per cent correlation with Nifty weekly returns. Indian investors can access this portfolio through GIFT City-based SMAs or as accredited investors, with a minimum investment of USD 25,000.

Balanced Portfolio: Higher Returns, Lower Volatility

Mukherjea emphasised that a blended India-US portfolio, rebalanced annually, would outperform a purely India-focused portfolio. This is because regular rebalancing forces capital into the market going through periods of weakness, enhancing overall returns. At the same time, diversification reduces portfolio volatility, making it a win-win strategy.

“Smart investing isn’t about choosing one market over the other—it’s about striking the right balance,” Mukherjea said.

In summary, Saurabh Mukherjea’s insights underscore the importance of global diversification for Indian investors. By combining Indian and US equities, portfolios can achieve higher returns with lower volatility, thanks to the low correlation between the two markets.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.