The Indian rupee has weakened 2.63% so far in 2026 and about 1.8% since tensions escalated in West Asia, pressured by higher crude oil prices, foreign fund outflows and a stronger dollar.
For Indian investors holding overseas assets, this currency move is not just a macro signal—it is directly shaping portfolio returns.
Two drivers of returns
For Indian investors holding US assets, returns are influenced by two variables: the performance of the underlying asset in dollar terms and the rupee-dollar exchange rate.
Subho Moulik, CEO & Founder of Appreciate, a stock market app, explains that both components operate simultaneously.
In 2025, while the S&P 500 delivered 17.9% in dollar terms, Indian investors saw close to 23% returns in rupee terms, with a portion of the difference attributable to currency movement, according to Moulik.
He adds that even in a scenario where a US asset delivered no returns in dollar terms, investors would still have seen gains in rupee terms during that period due to currency depreciation.
“When the rupee depreciates, the value of these foreign holdings rises in rupee terms,” Nikhil Behl, CEO of Stocks at INDmoney, says, adding that this can influence overall returns even if the underlying US market performance remains unchanged.
At the same time, Behl notes that market fundamentals, such as sectoral growth trends in areas like technology, artificial intelligence and energy, remain the primary drivers of long-term returns.
Macro linkages: Oil, flows and the dollar
The current phase of rupee weakness is closely linked to external factors.
Brent crude prices have risen about 40% since the start of the Iran conflict, increasing India’s import bill and demand for dollars. For an oil-importing economy like India, this widens the current account deficit and puts pressure on the currency.
At the same time, the US dollar has historically strengthened during periods of global uncertainty. Episodes such as the 2008 global financial crisis and the COVID-19 pandemic saw capital move into dollar assets.
What the data shows on global ETFs
Data shared by INDmoney, a super finance app, indicates that a wide range of global ETFs have delivered returns in dollar terms over the past three years:
- iShares MSCI World ETF: +58.9%
- iShares Russell Top 200 Growth ETF: +88.61%
- iShares Morningstar US Equity ETF: +65.63%
- iShares US Energy ETF: +43.04%
Other regional exposures also show gains:
- iShares Core MSCI International Developed Markets ETF: +42.06%
- iShares Europe ETF: +39.29%
- iShares China Large-Cap ETF: +29.38%
These returns reflect performance in dollar terms and do not include any currency conversion impact.
Is this a time to increase US exposure?
Moulik says the case for holding US assets is long-term rather than tactical.
He notes that the same events that weaken the rupee, such as oil price spikes, can simultaneously pressure Indian equities while benefiting certain US sectors like energy and defence.
The US accounts for roughly 60% of global equity market capitalisation, compared with about 4% for India, offering exposure to sectors and companies that are underrepresented domestically. At the same time, structural factors such as India’s reliance on imported energy and inflation differentials have historically contributed to gradual rupee depreciation.
Together, these trends have added an estimated 3-4% annually to returns for Indian investors in dollar assets over the past decade.
Behl says investors should maintain a diversified approach, with global exposure forming part of a broader portfolio strategy rather than a short-term currency view. US investments, he adds, can act as a complement to domestic holdings, particularly during periods when currency and market cycles diverge.
What if the rupee strengthens?
Currency trends can reverse. Periods of rupee appreciation, such as between 2003 and 2007, have historically reduced returns from US assets in rupee terms.
If the rupee strengthens or oil prices ease, the currency-related boost to returns would diminish, bringing outcomes closer to underlying dollar performance.
Moulik says investors concerned about currency volatility may consider staggering investments rather than timing entry based on exchange rates.
He also cautions against hedging long-term equity exposure using currency instruments, as the cost of hedging, typically 1.5-2% annually, can reduce overall returns.
