Emerging Market : Decoupled the Wrong Way?

For the past few days and weeks, I am observing that Nifty is under performing US markets. When Dow rallies the natural tendency is to expect Nifty to rally the similar percentage points and when it falls the same amount of correction. In the current environment where Global headlines dominate the proceedings I think its fair to assume it.

But as you too must have noticed, Nifty is not at all picking much of the positive sentiment that has developed recently in the US markets atleast. The chart below compares Nifty Vs S&P 500 for the past 3 years.

As you can see from Oct 2010 to Feb 2011 (4 months) Nifty has under performed SPX, since then it has been at par with it. Is another bout of under performance coming up for Nifty? Also notice how since Dec 2008 till July 2009 Nifty was trumping the SPX.

What I feel is that when RISK ON trade is on, emerging markets do much better than developed markets, and when RISK OFF trade is on, it fairs much poorly. So if fear trade is to carry on for some more time, expect Nifty SPX ratio to hit the 3.5 mark in near future. I checked the similar chart for Hang Seng instead of Nifty and it also tells the same story, only the situation is more grim.