Nine months into 2020: BSE 500 versus S&P 500

We compared the performances of two indices namely, S&P 500 and S&P BSE 500. For this, we have taken their closing values to determine the returns from the beginning of 2020 to September 30, 2020, i.e. of almost nine months.

Starting January 02, 2020, S&P 500 has given an absolute return of 3.23 per cent. The standard deviation of its daily returns was 0.024 per cent and its mean daily returns were 0.05 per cent. Simultaneously, S&P BSE 500 gave an absolute return of -5.37 per cent. The standard deviation of its daily returns was 0.02 per cent while the mean daily returns were -0.01 per cent. Simplistically speaking, 100 unit currency invested in S&P 500 at the start of the year would have become around 103, whereas the same invested in S&P BSE 500 would be around 95.

These statistics lead us to infer that BSE 500 has underperformed with respect to S&P 500. However, the standard deviation of daily returns, which reflects the volatility or the riskiness of returns, has been more or less equal to that of the US market index. Thus, from this analysis, we can derive that the US market has performed better than its Indian counterpart with almost the same riskiness in terms of return volatility. 

This is possible due to many factors but the significant factor that might have resulted in S&P 500 outperforming BSE 500 is the flight to safety. With an environment as uncertain as to the current one, investors go for developed markets and/or large-cap stocks rather than developing markets and/or small-cap stocks, as they are considered as the low-risk option.