This Budget India must re-incentivise global capital or risk being ignored

For years, India has assumed that foreign capital will naturally return—driven by demographics, GDP growth, and a compelling long-term story. But global capital does not invest in stories. It invests in risk-adjusted returns, measured in USD terms. And on that front, the data presents a stark warning.

Over the last 14+ years, Indian equities (NIFTY, USD returns) have delivered consistently inferior rolling returns on both 1-year and 3-year horizons when compared to the three most influential U.S. equity benchmarks: S&P 500 (SPX), Nasdaq (NDX), and Russell 2000 (RUT).

More concerning is not just lower returns—but higher risk. India has exhibited deeper drawdowns and lower Sharpe ratios, meaning investors took more volatility and pain for less reward. In contrast, U.S. indices delivered superior CAGR, stronger rolling returns, and materially better risk-adjusted outcomes.


For a global allocator—be it a pension fund, sovereign wealth fund, or institutional CIO—the implication is straightforward:
There is no portfolio-level compulsion to allocate incremental capital to India.

Foreign players in the Indian market have remained home-bound for quite some time now. Their exit has been cross-subsidised by Indian retail investors’ money that has found its way into equities through the SIP route. If this inflow also gets affected due to low return or dismal performance by the Indian institutional investors, the government may have to face a difficult situation to solve the potential problem. It should handle the issue of -both domestic and foreign- Capital delicately.

Capital today is global, flexible, and ruthlessly comparative. When U.S. markets offer:

• Higher USD returns
• Better Sharpe ratios
• Lower drawdowns
• Deeper liquidity and currency safety

India must offer explicit incentives to remain relevant.

Those incentives cannot be narrative-driven. They must come via:

• Lower tax and transaction friction
• Greater currency stability
• Regulatory predictability
• Market structures that improve risk-adjusted returns

The real risk for India is not capital outflows.

It is capital indifference.

If India wants sustained foreign participation, it must compete where global capital actually decides: USD returns per unit of risk.

Comparative Performance Snapshot (USD Terms)

Index	Period Tested	CAGR % (USD)	Mean Drawdown	Sharpe Ratio	Mean 1Y Rolling Return	Median 1Y Rolling Return	Mean 3Y Rolling CAGR	Median 3Y Rolling CAGR	Calmar Ratio
NIFTY (India)	Aug 2012 – Jan 2026	8.25%	-8.25%	0.14	7.81%	5.50%	7.03%	6.87%	0.19
Russell 2000 (US)	Aug 2012 – Jan 2026	9.44%	-9.49%	0.18	7.57%	6.38%	5.59%	5.64%	0.22
Nasdaq Composite (US)	Aug 2012 – Jan 2026	18.10%	-5.49%	0.65	15.42%	17.79%	14.09%	13.84%	0.51
S&P500 (US)	Aug 2012 – Jan 2026	12.62%	-4.08%	0.44	10.14%	10.98%	9.01%	8.36%	0.37

Source: Internal SAMCO Research. All Returns calculated in USD terms.

(The author is Founder and CEO, SAMCO Group)