Why the Nifty 50 is Better Than the S&P 500

Among major market indices, the S&P 500 is the go-to index for the broader stock market. It represents 500 of the top companies that trade in the stock market based on their market capitalizations. But on a global scale, the S&P 500 isn’t the only game in town and arguably could take a page out of India’s comparable index — the Nifty 50 — for even better results. Indian stocks have several tailwinds, including rising investments into the Southeast Asian region. Last year thrust the Nifty 50 into the spotlight when it began beating the S&P 500 on returns, and now investors are wondering if they might be missing out.

It’s not that the S&P 500 has a poor track record. It has gained a reputation as the go-to index for market exposure, comparisons and ETF tracking. It’s components set the standard for quarterly earnings performance, dividends and returns. In fact, the S&P 500 carries more than three-quarters of the total stock market’s value, and it is held by investors big and small either through direct exposure or investment funds. We’re talking about high-flying names like NVIDIA (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL), to name a few. 

Over the five-year stretch leading up to 2024, the S&P 500 delivered average yearly returns of 13.6%, or 8.9% adjusted for inflation. While it’s nothing to balk at, India’s market has growth on its side. India’s Nifty 50 is a younger, more nimble index that has the ability to do things that a larger index in a greater economy is not in a position to easily replicate.  With names like Reliance Industries, HDFC Bank and Tata Consultancy, the Southeast Asian index has a great deal of growth to offer investors.

Key Points in This Article:

• Emerging economies present tremendous upside potential as American equities face unprecedented uncertainty.
• One analysis suggests a return of nearly 700% for the Nifty 50 index in dollar terms vs. the S&P 500’s 321% over the past 25 years.
• If you’re looking for a megatrend with massive potential, make sure to grab a complimentary copy of our “The Next NVIDIA” report. This report breaks down AI stocks with 10x potential and will give you a huge leg up on profiting from this massive sea change.

Nifty 50 Mechanics 

Serving as India’s premier stock market index, the Nifty 50 is the cornerstone benchmark for the National Stock Exchange (NSE). Its function is similar to that of the S&P 500 in the U.S., acting as a measure of the Indian equity market’s overall performance while also reflecting investor sentiment. Since its debut in the mid-1990s, India’s index has tracked the performance of 50 of the biggest and most actively traded Indian companies on the NSE.

Performance 

It feels counterintuitive to bet against the U.S. stock market, so that is not the purpose of this argument. Nevertheless, the Nifty 50 has had an impressive run of late. Over the past couple of decades, the Nifty 50 has outperformed the S&P 500 in certain analyses. While a basic comparison might be influenced by currency fluctuations, studies that adjust for the depreciation of the Indian rupee against the U.S. dollar reveal the Nifty 50 delivering higher returns than the U.S. index. One analysis, in particular, suggests a return of nearly 700% for the Nifty 50 index in dollar terms vs. the S&P 500’s 321% over the past 25 years.

Much of this outperformance has unfolded over the past five years or so while India’s GDP has been expanding quickly amid policy support as well as domestic and international investment, which has widened the gap dramatically. For investors seeking to capitalize on a rapidly expanding economy, the Nifty 50 has arguably been a more compelling vehicle.

Nevertheless, it’s important to note that the Indian economy is coming from a lower base than that of the U.S. economy and therefore also carries with it greater risk. The U.S. economy is valued at $27.7 trillion compared with India’s GDP of approximately $3.6 trillion. 

Smaller Cohort

Secondly, you can argue that the Nifty 50 offers a more focused, high-quality play on India’s elite corporate sector. As an index of only 50 companies, it represents only the biggest and most liquid companies on the National Stock Exchange. This makes it a useful benchmark for investors who want exposure to India’s blue-chip leaders. These include stable, leading players in key sectors like financial services, technology and energy. For a new investor in the Indian market, this smaller, more focused list can be easier to understand and follow.  

Lower Base

Finally, while the S&P 500 represents a mature, developed market, the Nifty 50 is a direct bet on a still-developing economy with a GDP that is growing by leaps and bounds. This offers the potential for greater growth. Despite some of the volatility that comes with emerging market status, the Nifty 50 is seen as a key indicator of India’s economic health, and its performance has reflected the country’s strong growth of late. This combination of stability among its top companies and exposure to a high-growth economy makes for a compelling investment thesis. 

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