Five months into 2020: BSE500 v/s S&P500

The whole world has been hit by the Coronavirus pandemic and the stock markets, especially so. At the start of the calendar year, the world was looking at it as a local virus and did not understand its magnitude. It took a while for all nations to catch up to reality and it was on March 11, 2020 that WHO declared COVID-19 a pandemic.

Although we should begin analysing the effects of COVID-19 on stock markets since its outbreak, we have decided to keep it simple and examine the performances of two indices - S&P 500 and S&P BSE500. We have taken their closing values to determine the returns from January 01, 2020 to May 29, 2020.

Starting January 02, 2020, S&P 500 has given an absolute return of -6.55 per cent. The standard deviation of its daily returns was 3.10 per cent whereas its mean daily returns were -0.02 per cent. Simultaneously, S&P BSE 500 gave an absolute return of -21 per cent. The standard deviation of its daily returns was 2.70 per cent whereas the mean daily returns were -0.20 per cent. 

This brief study leads us to infer that BSE 500 has underperformed with respect to S&P500. However, the standard deviation of daily returns which reflects the volatility or the riskiness of returns has also been greater for US market index. Thus, we can derive from this analysis that the US market has performed better than its India counterpart and has also exhibited greater riskiness in terms of return volatility. 

This is possible due to many factors. One such factor that might have resulted in S&P 500 performing better than BSE500 is the flight to safety of institutional investors. With an environment as uncertain as the current one, investors go for developed markets rather than developing markets, as they are considered as the low-risk option.