Dow Jones Not Underperforming Emerging Markets

Let’s First Have a Look at Indian Sensex

Sensex touched the Figure of 1000 in July 1990

In July 1990 17.4 Indian Rupees Could Buy 1 Dollar

Now Suppose an US investor wants to buy 1 Sensex in 1990 he could buy 1 Sensex for 57.47 Dollars

Now Suppose He sells that 1 Sensex in 2008 at the Sensex top of 21206 and 39.2 Indian Rupees able to buy 1 dollar, he would get 541 Dollars

Now Lets have a look at Dow Jones

When Sensex touched a figure of 1000, Dow Jones was trading at around 3000

Now Suppose Indian Investor wants to buy 1 Dow Jones then he would require 52200 Rupees for the same.

Now if the Dow Jones is sold in 2008 at an all time high until now of 14297 when 39.2 Rupees can buy 1 Dollar, his returns are 560442

So in the Long term both the Indexes have given similar returns with the only difference being that since Indian Rupee depreciated against the Dollar hence the Indian Sensex moved more then the Dow Jones.

Also while the Dow Jones moved to 12000 in Jan 2000 from 4000 in Nov 1994 the Indian Sensex barley moved in the same period, while when the Sensex moved from 6000 in Jan 2000 to 21000 in Jan 2008 the Dow Jones was nearly stable in the same period.

Similarly if you have a look at the Emerging Markets like China, Brazil, Mexico, Korea, Indonesia, whose Indices have doubled or even quadrupled from their 2000 highs, you will see that there currencies have depreciated hugely against the dollar in the nineties and also they did not give a big upmove in the period between 1994 to 2000.