Why Indian Equity Returns Look Different in Dollars 15May2026
(This is my 513th blog since 2010. Over the years, I have covered global financial markets, with a focus on India, and continue to share insights to help readers understand complex topics in simple language.
The views expressed here are for information purposes only and should not be construed as a recommendation or investment advice. While the author is a CFA Charterholder with nearly 25 years of experience in financial markets, this content is intended to share general insights and does not constitute financial guidance.
Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)
Indian stock market returns can look very different when measured in rupees versus US dollars. The difference is not driven by company performance, but by currency movement over time.
India Equities in a Global Lens:
For investors outside India, the story does not end with stock performance. Returns are also shaped by changes in the Indian rupee against the US dollar, which means the same market can deliver different outcomes depending on the currency in which it is viewed.
Two Ways of Looking at the Same Market:
The BSE Sensex and the BSE Dollex 30 are used as proxies for the Indian equity market. Both represent the same basket of 30 large, liquid and financially sound Indian companies. The only difference is currency denomination.
The Sensex is measured in rupees, while the Dollex 30 expresses the same performance in US dollars after accounting for currency movement.
Because they track the same underlying companies, any gap between them is not about stock selection. It is entirely driven by currency.
Where Currency Changes the Story:
For a domestic investor, returns are straightforward. If the Sensex rises, wealth in rupee terms rises. For a foreign investor, however, there is an extra layer.
Even if Indian stocks rise, a weakening rupee reduces the return when converted back into dollars.
Similarly, a stronger rupee can boost foreign investor returns even when the underlying stock performance remains the same.
This is why the same market can feel stronger or weaker depending on the currency perspective.
What the Data Show:
Chart showing Indian stock market returns in local currency (Indian rupee) versus US dollar terms: BSE Sensex vs BSE Dollex 30:
The chart above compares annual returns and trailing returns of the Sensex in rupee terms and the BSE Dollex 30 in dollar terms. It also shows the currency impact, which reflects the effect of rupee movement against the dollar over time.
A few patterns become clear from the data. Indian equities have delivered solid returns in local currency terms over the years. However, the returns in dollar terms are consistently lower in most periods.
The difference is primarily explained by gradual depreciation of the rupee over time.
Examples from the Data Chart above:
In 2017, Indian stocks had a great year in rupee terms. The Sensex rose by 27.9 per cent. But the BSE Dollex 30, which reflects the same market in US dollars, actually gained even more, that is, 36 per cent.
Why? Because the rupee strengthened (by about 8%) against the dollar that year.
A stronger rupee amplified returns for foreign investors, giving them more dollars for each rupee of investment, even though the stock market itself performed the same.
Contrast this with 2022. The Sensex rose modestly by 4.4 percent in rupees. However, the Dollex 30 fell by 6.3 per cent in dollar terms. The reason: the rupee weakened (by about 11%) against the dollar.
Even though the Indian market delivered a small positive return locally, foreign investors saw a loss in their home currency. A depreciating rupee reduced their dollar-denominated returns.
Trailing Returns: From an FPI perspective, the Sensex’s 11.4 per cent annualised return, over the past 10 years, drops to 7.5 per cent in dollar terms, meaning currency (India rupee depreciation) has reduced foreign investors’ returns by nearly 4 percent per year.
To put differently: Ten years can make small annual differences look very large. A 100 rupee investment, at a CAGR of 11.4 per cent, in the Sensex 10 years ago would today be worth about 295 rupees. That is a gain of 195 percent.
But the same market looks very different in dollar terms. A 100 dollar investment, at a CAGR of 7.5 per cent, in the BSE Dollex 30 would have grown to only about 205 dollars, a gain of 105 percent.
The annual return gap may appear to be only about 4 percentage points. Over long periods, however, compounding turns that into a very large difference in actual wealth creation.
These examples show how currency movement can either enhance or reduce returns for foreign investors, independent of how the stock market itself performs.
FPI Behaviour:
Foreign portfolio investors (FPIs) allocate capital based on expected returns in their home currency, making currency movement an important input in their decisions. A weakening rupee can reduce dollar returns and act as a headwind, while a stable or stronger currency improves expected outcomes.
However, currency is only one of several drivers, along with earnings growth, valuations, interest rates and global risk conditions.
A common market narrative is that sustained rupee depreciation alone explains weak foreign inflows into Indian equities. While currency matters, FPI flows are influenced by a combination of macro and market factors rather than a single variable.
Why Foreign Investors Care About This:
Foreign investors evaluate returns in their home currency, so what matters is not just stock performance but the converted value in dollars or euros. This is why a strong domestic market can appear weaker in dollar or euro terms when the rupee depreciates.
Conversely, a stable or strengthening rupee can enhance dollar returns, allowing foreign investors to outperform local investors even from the same market performance.
The Bigger Lesson:
Investing in any country is not just a bet on companies. It is also a view on currency. Over long periods, currency movement can quietly add or subtract meaningfully from equity returns when seen from a global perspective.
This is why global investors always evaluate markets on a currency adjusted basis. It is not a different market. It is simply a different lens on the same market.
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References:
See Update 03Jan2026 with charts 162 and 163 in blog: Forex Data Bank - to check the data of Indian rupee depreciation versus the US dollar (27 years data)
Tweet 20Jan2026 Sensex at 40 years - Sensex price returns and TRI
Value Research BSE Indices
BSE Dollex 30 factsheet
What is Sensex and Its Importance in the Indian Stock Market 17Dec2009
