For Indian investors who invested in US stocks in FY 2025-26, this year proved to be a double bonanza with a strong US market and a weakening rupee. The S&P 500 index, which is a benchmark index of the US stock market, performed well in FY 2025-26, closing with a gain of 14% over the year. At the same time, the Indian rupee weakened by nearly 10% vis-à-vis the US dollar.
The Double Benefit for Indian Investors
The S&P 500 index, which is a key indicator of the US stock market, performed well in FY 2025-26, closing with a gain of 14% over the year. At the same time, the Indian rupee weakened by nearly 10% vis-à-vis the US dollar.
On April 1, 2025, the value of the US dollar in rupees was approximately ₹85.6. By March 31, 2026, this value had fallen to ₹94.6, a depreciation of nearly 10%.
or Indian investors holding assets in the US, this currency fluctuation meant that there was an additional increase in returns for Indian investors who converted their dollar assets back into rupees.
As explained by Subho Moulik, Founder, and CEO of Appreciate, “The impact of currency depreciation does not merely add up to stock market returns. Instead, it compounds stock market returns. The rupee depreciated by 10% against the dollar this fiscal year. The S&P 500 gained 14%. And because of this compounding, instead of merely adding up, an Indian investor who simply put his savings in US stock markets walked away with 25.4% returns on his investments instead of merely 24%.”
Understanding the Math Behind the Returns
To understand the math behind these returns, there is a simple example explained by Viram Shah, Founder, and CEO of Vested Finance:
“If you had invested your money in a stock market asset in the US at the beginning of the fiscal year, when the rupee-dollar exchange rate was roughly ₹85.5 per dollar. So, for every dollar, you would have to pay ₹85.5. Now, you had invested $100 in the stock market. So, your total investment in rupees would have been roughly ₹8,550.”
“If the S&P 500 went up by 14%, your returns on your investment of $100 would have been $114.”
However, this calculation does not take into account the conversion costs involved in sending and receiving the money. The conversion costs are around 2.5% for sending and another 2.5% for receiving the money. Even after taking these costs into account, the overall return will be around 23-24%, which is significantly higher than the pure equity return.
The important point to note is that currency movements act like a multiplier over time and not a simple additive return.
Even Flat US Stocks Can Generate Gains
The currency depreciation also helps Indian investors to achieve profits even if the US stocks do not move.
Suppose an investor invested an amount of $1 in a US stock on April 1, 2025, by paying ₹85.6. Assume that the stock does not move and remains the same throughout the year. The return on investment for the US stock will be zero dollars for the year.
However, when the investor sells the stock and converts the dollars back into rupees on March 31, 2026, the value of the dollar will have depreciated to ₹94.6.
The investor will receive ₹94.6 for the stock instead of the initial investment of ₹85.6 and will gain around ₹9 or a return of around 9.5% on the investment.
S&P 500 vs BSE 500 Performance
The difference in performance of the global stock market compared to the domestic stock market during the year further strengthened the case for international diversification.
The S&P 500 gave a 14% return in FY 2025-26, while the BSE 500 gave a negative return of about 4% over the same period.
When adjusted for the depreciation of the rupee, the performance gap between the two stock markets has widened even further. Thus, in effect, the S&P 500 has given a 30% higher return compared to the BSE 500 for Indian investors in terms of the rupee over the last fiscal year.
Why the Rupee Continuously Depreciates
The trend of the Indian rupee in comparison to the US dollar over the years has been consistently on the decline. According to experts in the stock market, there are some structural issues in the Indian economy that cause this trend in the rupee compared to the dollar.
These factors include India’s trade deficit, higher inflation compared to other developed countries, and the import of goods such as oil, electronics, and other commodities from other countries in dollars. All these factors have caused the rupee to depreciate over the years.
Once the depreciation of the rupee has been factored in, the performance gap has increased even more. Essentially, the S&P 500 has performed better than the BSE 500 by almost 30% for Indian investors in terms of the rupee for the fiscal year. This large differential in performance underscores the benefits of investing in different geographical markets, which can act as a buffer for investors in adverse market conditions. Why the Rupee Keeps Depreciating The trend of the Indian rupee in relation to the dollar over a long period of time has always been on the decline.
According to experts in the market, there are several structural issues in the Indian economy that cause this trend. The trade deficit of India, higher inflation compared to other developed countries, and dependence on imported goods such as oil, electronics, and other commodities priced in dollars are some of these factors. All these factors have caused the Indian rupee to decline over a very long period of time. Over the last three years, the Indian rupee has depreciated by 4.8%. Over the last five years, the Indian rupee has depreciated by a compound annual growth rate of 5.2%. At the same time, the S&P 500 has delivered a compound annual growth rate of 16.5% over the last three years. Similarly, over the last five years, the S&P 500 has delivered a compound annual growth rate of 10%.
For example, if an investor has invested in both the BSE 500 and S&P 500, and both of them have generated a 10% return over a period of five years, an additional depreciation of 5.2% in the value of the rupee could result in a higher return on US-based investments.
As Viram Shah, a financial expert, puts forward, “Global investing isn’t just about investing in companies outside of your country; it is also about investing in companies whose currencies appreciate over time, thus adding to your returns.”
For example, if an investor has invested in both the BSE 500 and S&P 500, and both of them have generated a 10% return over a period of five years, an additional depreciation of 5.2% in the value of the rupee could result in a higher return on US-based investments.
As Viram Shah, a financial expert, puts forward, “Global investing isn’t just about investing in companies outside of your country; it is also about investing in companies whose currencies appreciate over time, thus adding to your returns.”
The Case for Global Diversification
Investing in foreign markets also provides an opportunity to gain diversification benefits. This is because investing in foreign markets will not allow an investor to depend on a single stock market.
The US stock market provides an opportunity to invest in some of the world’s largest technology-driven companies. This is a great opportunity for those who are looking to gain growth benefits in the long term.
However, experts suggest that investors should keep their long-term financial objectives, risk tolerance, and asset allocation in mind before investing in foreign markets.
While investing in foreign markets, an investor should not forget that appreciation in the value of the rupee is an added advantage, not the sole purpose of investing in foreign markets.
