A few weeks ago, I was in conversation with a long-standing client—an astute entrepreneur whose portfolio had compounded beautifully over the last decade riding India’s growth story. Yet, in a rare moment of candour, he admitted: “Every time global markets rally, I feel I’m watching wealth being created elsewhere—without me.” That sentiment is more common than we admit.
A recent feature in The Times of India Wealth highlighted how, even as Indian markets delivered steady returns, several global indices—from the US to parts of Asia—outperformed in specific cycles. This is not an anomaly; it is a structural reality of investing in a multi-polar world.
The Behavioural Trap of Staying Local
Indian investors, particularly HNIs, often exhibit a strong home bias—a behavioural tendency to invest disproportionately in familiar domestic markets. While this creates a sense of comfort, it can quietly limit opportunity.
India today accounts for roughly 4–5% of global market capitalisation, which means a vast majority of investment opportunities lie outside its borders. Yet, many portfolios remain overwhelmingly India-centric. This is not always a conscious strategy—it is often driven by behavioural biases such as familiarity heuristic (preference for what we know) and availability bias (relying on easily accessible information).
Interestingly, this bias also interacts with what I call the performance extrapolation tendency. When Indian markets outperform for a sustained period, investors begin to assume that this trend will persist indefinitely. Conversely, periods of underperformance are dismissed as temporary aberrations.
However, market history tells a different story. There have been multiple phases where Indian equities have lagged global peers due to earnings slowdowns, valuation concerns, or foreign capital outflows. At the same time, global markets—especially in sectors like technology or commodities—have delivered strong returns. This cyclical divergence is not an exception; it is the norm.
From a behavioural standpoint, the challenge is not lack of information, but the reluctance to act against comfort. True portfolio sophistication lies in overcoming this inertia—recognising that opportunity is not geographically bound.
The Cyclical Nature of Markets
Markets across geographies move in different cycles, influenced by local economic conditions, policy environments, and sectoral dynamics. This lack of synchronisation is precisely what creates the case for global diversification.
When Indian markets face headwinds—be it due to domestic macro pressures or global liquidity tightening—international markets may still perform, offering a natural cushion to portfolios. Similarly, India’s structural growth story attracts global capital during favourable cycles. Diversification, therefore, is not merely about spreading investments—it is about spreading economic exposure.
Beyond Returns: The Real Case for Global Allocation
For HNI portfolios, global diversification serves multiple strategic purposes beyond return enhancement:
- Risk Mitigation through Low Correlation
Combining domestic and international assets reduces overall portfolio volatility and enhances risk-adjusted returns. Different economies respond differently to global shocks, making diversification a natural hedge. - Access to Structural Growth Themes
Many of the world’s most transformative sectors—artificial intelligence, global technology platforms, advanced manufacturing—are underrepresented in Indian markets. Global exposure allows participation in these megatrends. - Currency as a Strategic Lever
For investors with global financial goals—children’s education, international real estate, or lifestyle needs—currency exposure becomes critical. Investments denominated in foreign currencies, particularly the US dollar, can act as a hedge against rupee depreciation.
How Much is Enough?
While there is no one-size-fits-all allocation, a growing body of research and practitioner consensus suggests that 20–35% exposure to international assets can significantly enhance diversification for mature portfolios.
For HNIs, this allocation should be thoughtfully calibrated based on:
- Existing domestic concentration
- Currency-linked liabilities
- Risk appetite and liquidity needs
- Intergenerational wealth objectives
The Practical Route
Global investing today is far more accessible than it was even a decade ago. Investors can gain international exposure through:
- International mutual funds and feeder funds
- Global exchange-traded funds (ETFs)
- Direct investments via the Liberalised Remittance Scheme (LRS)
These avenues provide access to diversified global opportunities with increasing transparency and professional management.
Closing Thought
India remains one of the most compelling long-term growth stories globally, and it rightly deserves a central place in investor portfolios. However, concentration—even in a strong story—remains concentration. In an interconnected world, wealth creation is no longer confined to national boundaries. The most resilient portfolios are those that transcend geography—participating in global growth while managing local risks. As I often remind my clients, “Your portfolio should reflect the world you live in, not just the country you reside in.” Because in investing, the true edge lies not just in conviction—but in perspective.
References
- The Times of India Wealth, “When Indian markets trail, catch global gains by investing abroad,” April 2026.
- Moneycontrol, “Beyond borders: Why global investing makes sense for Indian portfolios.”
- Value Research Online, “How Indians can add global flavour to their portfolios.”
- Reuters, “India gains favour with global investors amid ESG momentum,” 2026.
- Reuters, “Indian benchmarks underperform peers amid earnings concerns and foreign outflows,” 2024.
- ResearchGate, “Global Diversification: Unveiling the Benefits of International Asset Investments.”
- Belong, “Global diversification explained for Indian investors.”
- Paytm Money, “International mutual fund investing abroad: A guide.”
Disclaimer:
This article is for educational and informational purposes only and does not constitute investment advice or a recommendation. The views expressed are based on the author’s personal research and expertise in behavioral finance and wealth management, and are not affiliated with or endorsed by any mutual fund house or financial product provider. Professor (Dr.) Meghna Dangi is not a SEBI-registered investment advisor. These are not promotional endorsements of any specific brand or financial institution.