Indian retail investors are increasingly turning towards China and Brazil-based exchange-traded funds (ETFs) this year, moving away from US markets due to better valuations and rising interest. Investment figures show significant growth for both countries, driven by the liberalized remittance scheme. Analysts suggest this trend reflects broader concerns about the US economic landscape and a pursuit of diversification.
As the year unfolds, retail investors are exploring emerging markets, particularly in China and Brazil, as a new flavor in exchange-traded funds (ETFs). It seems that many Indians investing abroad through the Reserve Bank of India’s liberalized remittance scheme (LRS) have turned their backs on the US, opting for these burgeoning markets instead. This trend is notable considering the recent decline in US equities primarily driven by trade tensions initiated by former President Donald Trump.
Data from various broking platforms suggest a significant shift among investors who historically favored US markets. Brokers reported that interest in China and Brazil ETFs saw a steeper increase compared to US-based investments. Sitashwa Srivastava, founder and CEO of Borderless, noted, “After January and especially through February and March, there has been growing interest in China… we noticed a bit of a de-focus on the US.”
At Vested Finance, the numbers are telling. They’ve recorded a staggering growth in Brazil-focused ETFs—$3 million in 2025, which is an astonishing 80-fold increase from the total in 2024. For China, ETF investments soared to $10 million, a tenfold uptick from last year, while US ETF investments only grew by three times in the same period. All said, the US investment figures stood at $80 million in 2025.
According to Appreciate Wealth, the uptick in investments in China was an impressive 36% by trading volume, and a whopping 61% by the total value compared to the previous year. For Brazil, the platform observed an even larger boom: a 110% rise in trading volumes and 245% in investment value. Meanwhile, US-focused investments lagged behind, with just 11% volume and 18% value growth.
This shift in investment patterns is largely attributed to the more appealing valuations available in the Chinese and Brazilian markets compared to the US. The Dow Jones suffered a correction of 6.57% since January 1, at the same time that China’s Shanghai Composite and Brazil’s IBovespa had returns of 1.06% and 10.7%, respectively. January data showed Brazil’s Ibovespa index valued at a trailing 10.8x, while Shanghai Composite was at 16.2x—lower than the Dow’s 23.21x.
As the numbers suggest, outbound investments via the LRS also saw a 65% increase month-on-month, reaching $173.84 million in February. Year-over-year figures showed a 20% rise to $1.51 billion in FY24 for equity and debt. It’s striking to see that over five years, this metric jumped 3.6 times from a mere $422 million in FY19.
Mayuresh Kini, co-founder of Zinc Money, noted rising interest among Indian investors for China stocks, specifically the China Tech ETF. Shrivastava pointed out that there is also a trend toward energy, electricity, electric vehicle, and tech ETFs in China.
Viram Shah, co-founder and CEO of Vested Finance, commented on how both institutional and retail investors are shifting focus from crowded trades to fresh opportunities in China and Brazil. He explained this pivot as a strategy to tap into markets poised for a rebound, particularly as US equities grapple with headwinds like valuation pressures and geopolitical risks.
Brazil’s comparative resilience lies in its solid fundamentals—a recovering economy, more affordable valuations, and less vulnerability to global tariffs. Macro strategist Ankita Pathak of Ionic Asset mentioned improved growth forecasts, expecting a rise to 2.5-3% in 2025, along with prospects of interest rate cuts amid softening inflation.
While the US market remains a staple for many investors, experts note that concerns about tariffs and economic uncertainty are pushing some to look at diversification opportunities in China and Brazil. As Pathak reminded, despite the US imposing higher tariffs, China’s economic narrative remains strong. Investors seem to believe the potential rewards in these emerging markets outweigh the risks, despite the skepticism surrounding China.
Market watchers are keen to see how this shifting appetite plays out alongside ongoing global economic dynamics, particularly as investors continue to seek greater diversification in their portfolios amid a climate of uncertainty.
In summary, the trend among Indian investors indicates a marked shift from traditional US-focused exchange-traded funds to emerging markets, particularly in China and Brazil. A combination of attractive valuations, a recovering economy in Brazil, and a resilient Chinese market narrative seem to be compelling factors driving this change. As these investors strategically tilt their portfolios, it’s clear that the dynamics of global investment are evolving, prompting a wider exploration of opportunities beyond directly adjacent markets.
Original Source: www.livemint.com
