Once we understand home-country bias, the next step is to look at how markets actually behave.

When most of our investments are inside India, our portfolio is closely linked to the Indian economy. Income, deposits, property, and equity investments are influenced by the same interest rate cycle, the same policy decisions, and the same growth environment.

This means that even though we may hold different assets, they are connected to similar economic drivers.

Now consider how Indian markets move relative to global markets.

From 2013 to 2025, the weekly return correlation between the Nifty 50 and the S&P 500 has averaged around 0.50. In simple terms, this means that the two markets move in the same direction only about half the time. The other half of the time, their movements differ.

When two markets do not move together consistently, combining them in a portfolio can reduce overall volatility over time. This is one of the basic ideas behind diversification.

If everything in a portfolio responds to the same domestic factors, then performance will largely follow the same economic cycle. When part of the portfolio behaves differently because it is influenced by another economy, the overall structure becomes more balanced.

The point here is not that one market is better than another. It is that exposure to only one system limits the range of economic drivers in a portfolio.