If you have looked at your investment portfolio over the last 24 months, you could be forgiven for feeling a sense of fatigue. Between September 2024 and mid-2026, the Indian equity markets have undergone a classic, muted consolidation phase. Against a backdrop of global geopolitical tensions, AI trade, and massive selling by Foreign Institutional Investors (FIIs), our domestic large-caps have felt exceptionally flat.
When an asset class moves sideways for two years, human nature triggers a psychological trap known as Recency Bias—the tendency to over-weight recent experiences when making decisions about the future. Right now, many investors are asking: “Should I completely exit India and move 100% of my capital into global portfolios like the US or Taiwan tech engines?”
To understand why taking investment calls based on short-term horizons is fundamentally suboptimal, we must study the exact same 20-year period through two entirely different lens settings.
Let us look at the first data set. This table captures a 20-year dollar-denominated (USD) compounding journey ending right now, in May 2026. This snapshot perfectly captures the tail end of India’s recent two-year consolidation window, alongside a hyper-extended, mature technology cycle in the United States.
If this is the only chart you look at, the decision seems obvious: liquidate domestic assets and chase global momentum. But an experienced investor knows that a 20-year compound annual growth rate (CAGR) is highly sensitive to its exact start and end dates. By evaluating an entire country at the absolute trough of its local cycle, you treat a temporary flat period as a permanent structural decline.
Now, let us shift our timeline back by just 20 months, ending in September 2024—right at the peak of India’s last multi-year earnings expansion, before the current flat window began.
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When we remove the near-term noise of the last two years, an entirely different truth emerges. Over a true 20-year structural cycle, India out-compounded the broad US market (S&P 500) by 180 basis points annualized in absolute US Dollar terms. An initial check of $100,000 compounding in India generated over $1 million, beating the S&P 500 by an absolute cushion of nearly $273,000.
How True Compounding Works: The 70/30 Rule
Compounding is a mathematical marvel, but it is deeply counter-intuitive to human psychology. Wealth does not compound in a straight, predictable line.
In equity markets, compounding follows a classic 70/30 rule: markets spend roughly 70% of their time consolidating, correcting, or moving sideways, and just 30% of their time making the entirety of their vertical returns.
Furthermore, consider the currency factor. Over the last two decades, the Indian Rupee has depreciated against the USD by roughly ~3.8% annually. Despite this massive structural currency headwind, India’s underlying corporate earnings growth was so potent that it completely absorbed the currency decay and still beat the broad Western indices.
The Cost of Chasing Near-Term Returns
Flipping your portfolio completely into global assets today because the US or Taiwan has had a spectacular run over the last 24 months is a textbook example of buying the past and selling the future.
By executing a complete emotional pivot right now, an investor inadvertently commits two grave tactical errors simultaneously:
- Selling Low: Liquidating an Indian equity basket that has already undergone a healthy, time-based valuation correction, right before its next structural earnings leap.
- Buying High: Allocating capital to global indices currently trading at historically elevated valuation multiples and heavily concentrated in a handful of technology names.
The Bottom Line: Patience is not a passive virtue; it is a tactical tool. The outperformance of the next 20 years belongs to investors who can sit through the quiet, flat periods of the present to capture the non-linear leaps of the future. Let us stay focused on the fundamentals, tune out the recency bias, and let compounding do its heavy lifting.
