In 2025, Indian retail investors are notably shifting focus towards China and Brazil for ETF investments, moving away from the U.S. This trend follows declining U.S. equity levels largely attributed to tariff wars. Investment growth in China and Brazil ETFs vastly outpaces that of U.S. ETFs, driven by attractive valuations and improving macroeconomic conditions.
As the investment landscape shifts, retail investors in India are increasingly turning to emerging markets like China and Brazil. Under the Reserve Bank of India’s liberalized remittance scheme, investors appear to be diversifying away from their traditional focus on U.S. equities. This movement comes in response to significant declines in the U.S. stock market, notably exacerbated by trade tensions initiated during Donald Trump’s presidency.
Conversations with various brokerage firms indicate an impressive shift in investment patterns this year. Data from brokers reveals that investments in China and Brazil have surged compared to the U.S., marking a substantial transformation from what we observed previously. Notably, after the start of this year, there have been heightened interests in China-focused exchange-traded funds (ETFs) and select Chinese companies, as noted by Sitashwa Srivastava, CEO of Borderless, a platform that has executed over $2 billion in trades in the last three years.
In terms of specific figures from Vested Finance, investments in Brazil-focused ETFs have reached an astonishing $3 million in 2025, representing an 80-fold increase when compared to all of 2024. Meanwhile, investments in China-focused ETFs saw an impressive 10-fold increase to $10 million in the same timeframe, outpacing a 3x boost in U.S. ETF investments, which stand at $80 million.
Further corroborating this trend, Appreciate Wealth reported that investment volumes in China surged 36% and by value, a notable 61% during 2025 when compared to the previous year. Investment in Brazil showed even more significant movements, with a 110% increase in volumes and a whopping 245% growth in value in 2025, standing in stark contrast to a modest 11% volume and 18% value increase in U.S. investments during the same period.
The shifting focus towards Chinese and Brazilian markets can largely be attributed to more appealing valuations compared to U.S. equities. The Dow Jones index has corrected 6.57% since the start of the year, while the Shanghai Composite and Brazil’s IBovespa have shown resilience, gaining 1.06% and 10.7% respectively in the same time. In January, Brazil’s Ibovespa was trading at a trailing valuation of 10.8 times, with the Shanghai Composite at 16.2 times, both significantly lower than the Dow’s 23.21 times.
Additionally, the uptick in investments aligns with a sharp increase in outbound remittances under the LRS, which rose 65% month-on-month, reaching $173.84 million in February, according to RBI data. Yearly, there has been a 20% increase, amounting to $1.51 billion in FY24, with a significant jump over the past five years from just $422 million in FY19.
It is evident that Indian investors are honing in on Chinese stocks, specifically, the Technology ETFs. Mayuresh Kini, co-founder of Zinc Money, mentioned the particular interest in tech investments. The shift in investments reflects a broader strategy among retail and institutional investors moving away from crowded trades in favor of markets like China and Brazil, where there appears to be substantial upside potential, as noted by Vested Finance’s Viram Shah.
Brazil’s appeal, contrasting with the crowded U.S. market, arises from its competitive valuations and economic recovery prospects. According to Ankita Pathak, a macro strategist, rising growth forecasts and anticipated rate cuts strengthen Brazil’s attractiveness. She emphasized the impressive macroeconomic tailwinds that could support investments in Brazil.
Despite ongoing tariff concerns, experts maintain that China’s economic story remains robust. Pathak remarked that many Chinese enterprises are not reliant on the U.S. market, focusing instead on domestic demand or markets in Europe. This suggests a dual narrative: skepticism towards China exists, but it is paired with considerable upside potential.
In summary, retail investors in India are increasingly gravitating towards China and Brazil as new investment hotspots, moving away from the U.S. market amidst trade tensions and declining equities. With significant increases in ETF investments and promising valuations in these emerging markets, investors appear poised to explore diversification opportunities that benefit from more favorable economic conditions. The outlook remains cautiously optimistic, revealing a complex narrative where both risks and advantages coexist in this evolving financial landscape.
Original Source: www.livemint.com
