Diversification, in the words of Nobel laureate Harry Markowitz, is the "only free lunch left" for investors. The need to rebalance has become imperative amid the shifting sands of geoeconomics, and data suggests that re-engineering portfolios with an overseas outlook has rewarded investors in the long run, say analysts.
"The portfolio evidence, from our own research: a 50:50 India-US allocation returned roughly 1,080% from the 2008 market bottom through March 2026," said Subho Moulik, founder and CEO of Appreciate Wealth, in response to queries sent by NDTV Profit.
In comparison, an India-only portfolio generated roughly 750% returns, Moulik said, citing the research.
What also supports the case of diversification is the yearly depreciation in the Indian rupee. "The currency has depreciated roughly 3.4 to 5% a year structurally, depending on the period measured. That compounds dollar returns for an Indian investor regardless of which US sector delivers them," he explained.
Not just India, but the currencies of most emerging markets depreciate, making "at least some amount of diversification much needed", added Kranthi Bathini, director of equity strategy at WealthMills Securities.
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The US stock market, whether it outperforms or underperforms, maintains its dominance in the global equity space, he pointed out. This is one of the key reasons behind its lure among a significant section of Indian investors, particularly the ultra-high net worth individuals (UHNIs), Bathini said. "The decision to diversify also boils down to the wallet size of the investors."
Recent data shows that Wall Street has rewarded investors more handsomely, as compared to its emerging market peers. As of July 13, the S&P 500 is up nearly 21% over the past year, and the tech-heavy Nasdaq Composite has logged an even sharper 27% return in the same period. In comparison, India's benchmark index, the Nifty 50, is down by nearly 4% over the past 12 months.
According to Moulik, Wall Street's bull run still has significant steam left, and the likelihood of a correction could be restricted only to the hyper-rallying AI stocks. "Global diversification is a portfolio decision, and the case for it runs through every sector, from healthcare to financials to industrials, most of which have nothing to do with this correction," he said.
Not just UHNIs, but retail investors can also systematically ride this bandwagon, the Appreciate CEO said. Both ETFs and direct stocks are accessible, making portfolio adjustment simpler for small-ticket investors as well, he said. "The lesson is simple: rebalance the concentration, keep the diversification. Because breadth, not exit, builds wealth across cycles."
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