India or US: Where should US-based NRIs invest?
Don't compare India and the US based only on returns Currency risk matters as much as investment returns Where you plan to live should decide
Don't compare India and the US based only on returns Currency risk matters as much as investment returns Where you plan to live should decide where you invest How should different types of US-based NRIs allocate their portfolio? 1. NRIs planning to settle permanently in the US 2. NRIs planning to return to India 3. NRIs who are undecided For many Indians living in the US, investing back home is often driven by emotion as much as economics. Familiarity with Indian companies, the country's long-term growth story and plans to eventually return encourage many NRIs to continue investing in India.At the same time, the US offers a large capital market with dollar-denominated returns and investment products that naturally align with the financial lives of those who plan to stay there for a longer period or permanently.So, should the US-based NRIs invest in India or simply keep all their investments in the US?Experts say framing it as an "India versus US" choice is the wrong approach. Instead, investors should first ask a more important question: Where will I spend my money in the future?Many investors assume India's faster economic growth automatically translates into higher investment returns.However, that isn't necessarily true for someone whose wealth and expenses are measured in US dollars, says Viram Shah, Founder & CEO, Vested Finance.Citing long-term data from the NSE, that over the 30 years ended March 2026, the Nifty 500 delivered a compounded annual return of about 8.26% in US dollar terms, while the S&P 500 returned about 8.33% annually, notes Shah.India's economy may have grown faster, but a significant part of that advantage was offset by the depreciation of the rupee against the US dollar over time."India isn't necessarily a higher-return market for someone earning and spending in dollars.
It behaves differently from the US market, and that's where its diversification value lies," he explains.In other words, the case for investing in India should be based less on trying to outperform the US and more on reducing dependence on a single economy and market cycle.One of the biggest mistakes NRIs make is focusing only on investment returns while ignoring exchange-rate movements.Even if an Indian investment generates attractive returns in rupees, a weakening rupee can reduce or even eliminate those gains when converted back into dollars.Shah points to a recent example. Over the past year, the Sensex declined by around 7%, while the rupee weakened by nearly 12% against the US dollar. For a US-based investor measuring wealth in dollars, the overall return was significantly worse than what the headline equity market numbers suggested.The same principle applies to debt investments.Although NRE fixed deposits may offer interest rates of around 6.5% to 7.25%, Shah says these returns are exposed to currency risk. Moreover, while interest on NRE deposits is ta free in India, it is generally taxable in the US under IRS rules.For investors seeking India-linked opportunities without taking rupee risk, he says US dollar-denominated deposits offered through GIFT City provide a more appropriate comparison than rupee deposits.Investment allocation should follow future financial goals, not current employment, say experts.Many investors mistakenly allocate assets based on where they currently earn their salary, says Harsh Gupta, Founder, SIPYatrra.Instead, they should consider where future expenses are likely to arise.“Your portfolio should primarily reflect where your future financial responsibilities lie.
The BriefWire