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Charts & Analysis

Chart: US Investors Remain unimpressed by Bull Run, Returns less than a Bond ETN Since 2006

I was looking at how US Traded ETFs were doing in terms of fund flow and saw an interesting chart which tells you why US investors haven’t at all been enthused by this fantastic rally we have seen till Jan 2015, and then the market drop since then. For Indian investors, a level of 7000 is still higher than anything we saw in 2007-08 or in 2010 – but for US investors, the level is a considerable 27% lower than the 2010 highs, and 36% lower than the 2007 highs! (Source)

MSCI Index Return from 2006 To 2016

What went wrong? The Rupee, that’s what. With the rupee at 68 now the depreciation has killed returns for US dollar based investors. The index has seen a return of 2% since 2006, annualized.

2% looks okay for someone today in the US – but in 2006, the 10 year rate was around 4.4%. That means it would have been better for a US investor, in 2006, to have bought 10 year bonds than to have invested in India.

While it may seem like an SIP was better, the SIP return since Jan 2007 was about 1.9% per year. No wonder US investors don’t find it great!

  • R Varadarajan says:

    Dear Deepak, I full agree with your observation. It is a strange coincidence, exactly a year ago,I had, in my blog post ” thoughtandforethought.blogspot.in” indicated that with with the falling rupee exchange rate, FIIs would continue to encash their investments when they get a postive return above the break even levels. Scenaio today is worse than what it was a year ago and they are not getting return equivalent to their US Bond rates and nare naturally concerned. After all they are here to make money for their investors.

  • Siddhesh Ayre says:

    I think there is a problem with the underlying assumption in the article that US investor (FII) would like to invest in Indian equity for 10 years without hedging his/her currency risks. If one looks at how FIIs have been trading in Indian markets, they seem to be taking short term view rather than long term view on Indian markets.