Indians investing in US stocks ended FY 2025-26 with a double advantage. The S&P 500, a leading US market index, closed FY 2025-26 (as of March 30) up by 14%.
The rupee-dollar exchange rate was another significant benefit for Indian investors in the last year.
The Indian Rupee fell 10% against the US dollar during the same period. This depreciation adds to the gains in the hands of the Indian investor. “The rupee fell 10% against the dollar this fiscal year, the S&P 500 returned 14%, and because the two compound rather than add, an Indian investor who simply put some savings in US equities walked away with 25.4% and not 24%,” says Subho Moulik, Founder and CEO, Appreciate.
But how exactly does this work?
Viram Shah, Founder and CEO, Vested Finance, shares an example. If you invested $100 in March (approx Rs 8,550) and the index delivered 14%, your value becomes $114. Now, if USD-INR moves to Rs 94 from Rs 85.5, that converts to approx Rs 10,721, a return of roughly 25.4% in INR terms.
Of course, this does not factor in forex costs, which on both legs can be approx 2.5%. Even after adjusting for that, the effective return would still be in the approx 23–24% range. The key point is that currency does not add linearly; it compounds. It acts more like a multiplier on returns over time.
How much has the rupee actually fallen?
On April 1, 2025, one had to pay Rs 85.6 to buy a dollar. Today, you need Rs 94.6, nearly 10% more, as INR has weakened by 10% against the dollar in FY 2025-26.
Here is a simple example of how this translates into gains. Say, on April 1, 2025, you bought 1 dollar by paying Rs 85.6 and invested it in a US stock. The stock had a roller coaster ride but ended the year on March 31, 2026, exactly at the same price. Your nominal return on the stock is zero.
But when you sell the stock and bring your funds back to India, you get the exchange rate applicable on March 31, 2026 — Rs 94.6. Ignoring taxes and forex charges, the gain even when the stock price stays flat is Rs 94.6 minus Rs 85.6 = Rs 9, or 9.5%.
S&P 500 Vs BSE 500 index
S&P 500 returned 14% in the last year, compared to a negative 4% return in the BSE 500 index. After adjusting for rupee depreciation, the returns for an Indian investor jump further. In a way, in dollar terms, the S&P 500 has outperformed the BSE 500 by nearly 30% in FY 2025-26.
And this may not be a one-time story. Historically, the INR has kept depreciating against the dollar. “INR depreciation has been persistent, driven by factors like trade deficit, inflation differential, and reliance on dollar-linked imports such as crude and electronics. This is not a one-off move and is likely to continue over long periods,” says Shah.
Over the last 3 years, INR has fallen by 4.8%, while over 5 years it has depreciated at a CAGR of 5.2%. The S&P 500, meanwhile, delivered a 16.5% CAGR over 3 years and 10% CAGR over 5 years.
Should you invest in US stocks just because of the rupee depreciation?
Not entirely. The decision to invest in US stocks should not be based solely on the INR-USD exchange rate. Over the last decade, returns in the US and Indian stock markets have been identical — but due to rupee depreciation, US investments would have delivered higher returns for Indian investors.
Here is a practical example: the 5-year CAGR return for both BSE 500 and S&P 500 is 10%, but after adding the rupee depreciation of 5.2% against the dollar, the S&P 500 comes out ahead.
“For Indian investors, global investing is not just about accessing global businesses. It is also about holding assets in stronger currencies. Over time, currency itself becomes a meaningful contributor to overall returns, often working in the background,” says Shah.
One compelling reason to consider markets outside of India is diversification across geographies. One may think about investing overseas depending on their long-term goals, risk tolerance, and portfolio size.
“The US has been a remarkably dependable place for patient capital for a very long time. Indian investors who have looked the other way till now should look at overseas markets not just as a hedge against currency but also for high growth opportunities,” adds Moulik.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.