Sensex vs Dow Jones: How Indian and US stock markets compare

Investors are often advised to diversify geographically by investing in foreign markets. ET Wealth compares the Indian and US markets to help you decide.

Annual returns show very low correlation between the two markets
Price comparison over the past 10 years shows a correlation of 0.36. Low correlation is a major reason why Indian equity investors need to diversify abroad.

Data as on 14 Feb 2020 Source: Bloomberg, Capitaline


Financials dominate Indian indices; US markets favour tech firms
US markets exhibit comparitively more even distribution between sectors

Data as on 14 Feb 2020. Source: Bloomberg, Capitaline

Frontline stocks that influence US and Indian bellwether indices
Combined market cap of DJIA is nearly Rs 618 lakh crore, eight times that of Sensex at Rs 76.8 lakh crore

Note: Indian market represented by BSE Sensex; US market represented by Dow Jones Industrial Average. Both are large cap indices comprising 30 stocks each.
Data as on 14 Feb 2020 Source: Bloomberg, Capitaline

Frontline Indian index is more expensive than US
Indian market continues to trade at higher multiples and offers lower dividend yields.

US market has given higher returns for longer
Dow has comfortably beaten Sensex over 5 and 10 year time periods.

Data as on 31 Jan 2020. Source: Index factsheets.

Both markets have shown high degree of concentration in returns
A select few stocks have been responsible for much of the gains in the Indian and US markets.

Data as on 31 Dec 2019 Compiled by ETIG Database

Top 3 stocks make up a larger chunk of the US market
Both markets exhibit a tilt towards a few names, with a long tail of low weighted stocks.

Data as on 14 Feb 2020. Source: Bloomberg, Capitaline

US market has been less volatile over long term
Indian equities have witnessed bigger swings in returns over the years—another reason why experts suggest diversification.

Data as on 31 Jan 2020. Source: Index factsheets.

Indian cos have delivered higher earnings growth
Leading US firms have clocked lower profit growth as these have already reached much larger scale of operations

Data as on 31 Jan 2020. Source: Bloomberg, Capitaline