We as consumers have gone global for our everyday needs, the smallest things we use come from different countries, from the food we eat to the utensils that we cook that in, everything is made by companies located beyond geographical boundaries.
Consumer needs have expanded with the advent of liberalization and globalization. We use items created in many parts of the world. Everything we use, from our phones to the food we eat to the clothes we wear, is manufactured by corporations located all over the world. If our consumption alternatives have expanded globally, why are our investment options limited to our country? Some country stock indices have even outperformed large hedge fund profits.
What are Stock Exchanges?
A stock exchange is a place where the shares of a company are listed and it is a meeting point for buyers and sellers of shares to transfer their ownership of shares and trade on the stock market.
Did you know that there are a total of 29 stock exchanges in India?🤯 The first one was started in Bombay in 1875 and is said to be the oldest stock exchange in all of Asia. NSE and BSE are recent creations, founded in 1992 and 1957 respectively. A stock exchange plays a vital role in any country’s economy as they allow a free market and democratized access to capital and for investors of all kinds.
The equity and stock market are well-known for being a good inflation-beating, return-generating vehicle. There are several stock exchanges around the world, but which of them would have been the most beneficial for you to invest in? Here is a list of the top five stock exchanges in terms of returns to investors over the last five years.
Top 5 performing stock exchanges in the world In the last 5 years
Here’s a table of the best performing Stock Indices in the last five years and how your capital would have grown in these respective indices-
ABSOLUTE RETURNS 167.51%
National Association of Securities Dealers Automated Quotations or NASDAQ is the second-largest stock exchange in the World on the basis of market capitalization. It is an American Stock Exchange located in New York, USA. It has more than 3000 stocks listed with giants like Apple, Microsoft, Google, Amazon and Tesla. ₹100000 invested in Nasdaq 100, 5 years ago would have given your absolute returns of 167.51% amounting to ₹267509.25.
ABSOLUTE RETURNS 161.96%
London Stock Exchange is located in London, established in 1801 is the oldest stock exchange in the world. Its index FTSE100 gauges the movement of the top100 stocks by market capitalization on the stock exchange. Some prominent companies listed in LSE are AstraZeneca, Glaxosmith and Unilever. It has provided spectacular returns to investors, ₹100000 invested in FTSE100 five years ago would have amounted to ₹261961.274 with an effective CAGR of 21.24%.
ABSOLUTE RETURNS 92.259%
National Stock Exchange (NSE) is one of the most prominent stock exchanges in India. Located in the financial capital of India- Mumbai, it is also the largest global derivatives market with the highest number of derivative contracts traded in the world. The index NIFTY50 gauges the performance of the top 50 shares in terms of market capitalisation and has performed impressively owing to attractive inflows of funds by FIIs and DIIs in recent years. NIFTY50 would have grown your ₹100000 at a CAGR of 13.966% for five years to ₹192258.691.
NYSE S&P 500
ABSOLUTE RETURNS 90.01%
NYSE or New York Stock Exchange is the largest stock exchange on the basis of market capitalization, founded on 17 May, 1792, with just five securities, now has a market capitalization of 26.11 Trillion US Dollars. Its Index Standard & Poor 500 (S&P 500) which is a market capitalization-weighted Index, has provided absolute returns of 90% in the last five years.
TADAWUL STOCK EXCHANGE
ABSOLUTE RETURNS 87.35%
Tadawul stock exchange is the only stock exchange in Saudi Arabia, with more than 200 companies listed on the stock market including Saudi Aramco, the giant oil producer in the world with oil barrel reserves of over $260 billion. Tadawul All Share Index (TASI), tracks the performance of all the companies listed on the Saudi stock exchange. ₹100000 invested in TASI five years ago would have amounted to ₹187349.823 with an attractive CAGR of 13.378%.
Future of Indian stock market and overview
Sensex has grown at a CAGR of 16% since its inception. The government has also set a target of achieving a $5 trillion dollar economy by 2025. The economy is gathering pace since the covid pandemic started to get in control. The growing GDP and continuous inflow of capital from foreign institutions give hope of taking Indian Indices to a whole new level in the coming years.
RBI had given mutual funds registered with SEBI a limit of $7 Billion in overseas securities, but in January this limit was breached and newer investments into mutual funds investing overseas were paused. The force by which the Indian retail investors are investing in foreign equities is growing rapidly and the exposure of MNCs in an individual portfolio is increasing, the average Indian investor has become more educated as well as global. Do you own any foreign stocks? And if yes, how are you invested in overseas equity? Do let us know in the comments.
Don't limit your investment options; instead, let it explore the entire globe before deciding what is best for you. With so many choices for investing in international equities now available, our portfolio can now transcend geographical boundaries.
If you want to know how to invest in foreign equities, do read this blog- Ways to Invest in Foreign Stocks.