Indian Stock Market Vs US Stock Market: Every investor, new or experienced, have thought about investing in the US stocks such as Tesla and Apple.
Given the size of the American markets and their companies, it is no surprise that we are all in awe of their business potential.
On the other hand, we have the Indian stock market, which has great potential for growth, as India is still an emerging market.
Multiple sectors are taking off and are yet to see their peak potential. For example, the booming EV market is growing at a fast pace, both domestically and internationally.
Let’s take a look at both markets and compare them head-to-head using some common metrics. Before comparing the Indian Stock Market Vs US Stock Market, we’ll need to have a brief overview of each market individually.
The Indian Stock Market – Overview
The Indian stock market is one of the oldest in the world. Bombay stock exchange is the oldest exchange in Asia, having been set up in 1875!
The Indian stock market is one of the emerging markets in the world, given the fact that India is still a developing country.
Emerging markets have immense potential for growth and therefore, give multibagger returns to investors. This is primarily due to the fact that the country’s economy and growth are yet to reach their peak.
Take the example of Coca-Cola. It is currently one of the biggest soft drinks companies in the world and the company has entered almost every country’s market.
But the probability of Coca-Cola doubling in size from its current position is very unlikely. But if we look at a much smaller beverage company that is fairly new, with a unique product that customers find appealing, the growth potential could be exponential.
In India, investors can buy and sell shares on the two biggest exchanges of the country – BSE and NSE. BSE was the first Indian stock exchange set up in the 19th century and NSE is comparatively newer, having been set up in the Nineties.
BSE (5,311) has more stocks listed on its exchange than NSE (2,113). But NSE is much larger in value, and is the eighth largest stock exchange in the world, with a market capitalization of $3.3 trillion dollars (Statista).
Both exchanges follow the same timing – Monday To Friday 9.15 a.m. to 3.30 p.m. are regulated by the same body – SEBI.
Each of the two exchanges has one index – Sensex which consists of the 30 biggest stocks in the BSE and NIFTY 50, which includes the 50 largest companies.
US Stock Market – Overview
The American stock market is the largest in the world. At the helm is the NYSE (New York Stock Exchange), with a market capitalization of over $22 trillion dollars.
Some of the largest companies in the world are listed on the NYSE. The roots of the NYSE can be traced back to the Buttonwood Agreement in 1792.
The Agreement was signed by twenty-four stockbrokers and it was created to increase public confidence in the stock market. The US markets are part of a developed economy, given that they were established centuries ago.
The major stock exchanges of the US Stock market are NYSE and NASDAQ, along with some smaller exchanges present across the country.
Similar to how we track Sensex and NIFTY indices in India, the US markets have their own indices, which are much larger in size.
Some of the broadly followed indices in the USA are – S&P 500, the Dow Jones Industrial Average, and the Nasdaq composite.
While there are many more indices in the US markets, these three are the most followed and reputed indices that are used by investors and the media.
The S&P 500 Index is an index with the top 500 companies in the U.S. The S&P 500 is a market-weighted index meaning that the stocks chosen for this index are based on market capitalization.
Other factors such as liquidity, public float, sector, and trading history are also taken into consideration as well.
Indian Stock Market Vs US Stock Market – Comparison
Let’s understand the difference between the Indian stock market and the US stock market.
1. Volatility
The Indian markets have seen great fluctuations in the past year. In the long run, the US markets had lower volatility.
A key difference between the two markets is that in India, we have circuit breakers that limit the rise and fall of stocks in a trading session, whereas US stocks are known to fall by huge percentages in a single trading session.
2. Global Factors
Most of the stocks that you can buy in the Indian stock market are small and medium-scale businesses that are still growing and majorly have domestic operations.
Due to low exposure to global factors, the stocks are less susceptible to sharp falls and rapid rises in share prices.
The US stock market is exposed to various global factors as it is part of the world’s largest economy with international ties with every other major economy in the world.
Also, some of the biggest stocks in the US markets have global operations in terms of sales, manufacturing, services, etc. This makes the American markets exposed to global issues on international shores.
3. Size
The size comparison of the two markets is quite obvious – The US Stock market is the biggest in the world, as the USA is a developed economy with powerful ties and strong economic policies allowing them to have a stronghold on the markets.
The Indian Stock markets on the other hand are much smaller in size as India is still classified as a developing economy and the Indian stock market is still one of the emerging markets of the world.
For comparison – The NYSE, the biggest stock exchange in the world has a market capitalization of almost $23 trillion dollars. India’s biggest exchange – The NSE, has a market cap of just $3.3 trillion dollars.
4. Diversification
The major Indian Indices – Nifty and Sensex largely consist of domestic enterprises, although their business operations are international and domestic.
Unlike the US markets, the Indian stock market doesn’t have many international stocks and has a higher risk of market crashes. Even in the event of a crash, the recovery could take longer than international markets.
Even though it is the US stock market, companies around the world recognize its influence and importance and therefore understand the need to list themselves on the US market as well.
This makes them a diversified market, as it includes stocks from the US as well as other global corporations. Even some of the biggest Indian companies are listed on the NYSE. Some of them are – ICICI Bank, Tata Motors, Infosys, etc.
Another interesting fact is that the US stock market indices include both US and global stocks. Infosys, the 2nd largest IT company in India was the first Indian company to be a part of the NASDAQ 100 index.
5. Currencies
To invest in the Indian markets, we only use the Indian rupee (₹ INR). Including stocks, every other investment involves using the Indian rupee. Over the past decade, the rupee has fallen against the dollar.
Officially, the world economy doesn’t have a unanimous currency that is accepted everywhere. Unofficially, the US dollar is one of the most powerful and circulated currencies in the world.
Given that it has moved up against the rupee over time, it makes more sense to investors to invest in the US dollar.
Indian Stock Market Vs US Stock Market – Table
| Criterion | Indian Stock Market | US Stock Market |
| Volatility | Higher Long Term Volatility | The lower long term volatility |
| Global Factors | Lower Exposure To Global Factors as most stocks have domestic operations | Much higher exposure due to international operations of major US companies. |
| Size | Classified as Emerging Market by IMF | World’s Largest Stock Market |
| Diversification | Indices are diverse by sector, but not by geography | Indices are diverse by sectors and geography |
| Currency | Only the Indian Rupee is used for investments, which has weakened against the dollar. | The US dollar is used for investments, which has a strong global power. |
| 5-Year Returns | Sensex: 76.81 percent | Dow Jones Industrial Average: 27.7 percent |
Also Read: 10 Best YouTube Channels To Learn Share Market in India 2023!
In Closing
Ideally, most investors would love to own shares of Apple, Google, or Microsoft. These stocks have given returns that have been exponential over time and the companies have created millions of jobs over time.
Comparing the Indian stock market Vs US stock market brings out the strong points in both markets. Which market do you prefer for your investment journey? Let us know below! Happy Investing!
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