The negative ‘long-term’ return is one of the reasons for the recent exit of FIIs from India. But, domestic investors were protected by depreciation of rupee.
ET Bureau
Most investors, both Indian and foreign, swing between fear and greed and are influenced by historical returns. They invest more when earlier investments are making good returns and stop investing or start withdrawing while staring at losses.
Investors know that equity is a ‘long-term’ asset class, but their patience withers when the stock market does not generate returns in the ‘long term’ also.
The Dollex-30 (ie, the Sensex denominated in dollar), for example, is down 13% in the last five years and this negative ‘long-term’ return is one of the reasons for the recent exit of foreign investors from India. But, domestic investors were protected by the depreciation of the rupee.
So, while foreign investors had a loss of 13%, domestic investors were able to generate absolute return of 29% in the last five years. From the 2007 peak, the absolute return for domestic investors is 20%, while foreign investors have lost 30%.
ET Bureau
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