Indian Retail Investors Turn to China and Brazil Amid U.S. Market Declines

Retail investors from India are shifting their focus from U.S. equities to emerging markets like China and Brazil, particularly for exchange-traded funds (ETFs), amid falling U.S. stock prices. Investment data reveal significant growth in these regions, driven by attractive market valuations. Analysts suggest that this trend marks a strategic shift towards diversification in an uncertain global economic landscape.

In a noteworthy shift, retail investors from India are turning to exchange-traded funds (ETFs) in emerging markets like China and Brazil instead of sticking exclusively with U.S. equities. This trend, stemming from a decline in the U.S. stock market following trade tensions initiated by former President Donald Trump, signals a change in investor sentiment. Data from several broking platforms exhibit an increasing preference for these markets, particularly since the start of the year.

Sitashwa Srivastava, CEO of Borderless, noted an uptick in interest in China-oriented ETFs, especially during the early months of the year. The data indicates that investments in China-focused ETFs have surged alongside a decrease in focus on the U.S. market. Similarly, reports from Vested Finance show a staggering rise in Brazil-focused ETFs, with investments skyrocketing by 80 times compared to the previous year.

The numbers are telling. In 2025 alone, investments in Brazil’s ETFs reached $3 million, while China-focused ETFs saw a tenfold increase to $10 million, even surpassing the threefold growth in U.S. ETFs during the same period. Appreciate Wealth also confirmed this trend, revealing a 36% growth in China’s investment volume and a striking 110% increase for Brazil, contrasting sharply with modest rises in U.S. investments.

What’s behind this pivot? Analysts point to better valuations in the Chinese and Brazilian markets rather than what is available in the U.S. The Dow Jones index dropped 6.57% since January, while the Shanghai Composite and Brazil’s IBovespa saw gains. Valuations appear more attractive as Brazil’s Ibovespa traded at 10.8x compared to the Dow’s 23.21x.

The momentum of these investments aligns with a notable rise in outbound remittances for equity and debt investments under the Reserve Bank of India’s liberalized remittance scheme (LRS). Notably, remittances surged by 65% month-on-month in February.

Interest in China tech stocks is particularly noteworthy. An increase in investor enthusiasm for sectors such as energy, electric vehicles, and technology has been reported. Some investors are opting to leave crowded trades in favor of potentially lucrative markets unencumbered by overvaluation torments or geopolitical tensions.

Viram Shah, CEO of Vested Finance, noted that this movement away from U.S. equities, particularly large-cap tech stocks, comes amid numerous challenges, including elevated valuations and geopolitical concerns. Comparatively, Brazil offers more reasonable valuations and a recovering economy along with less exposure to global tariffs, as mentioned by Ankita Pathak, a macro strategist.

Though the U.S. investment landscape remains significant for many, experts warn that growing concerns about tariffs, economic recession risks, and overall uncertainty are pushing some investors to diversify their portfolios into regions like China and Brazil. While challenges like tariffs on China persist, analysts maintain that the Chinese market operates robustly from its foundation.

Looking ahead, despite the controversy surrounding China’s economic practices, experts suggest there is potential for growth, with many Chinese companies tapping into robust domestic markets or aligning more closely with European markets. Thus, while skepticism remains, so does the possibility for significant upside in these emerging markets.

India’s retail investors are increasingly investing in foreign markets, notably China and Brazil, as evidenced by growing interest in ETFs. This shift reflects broader concerns about U.S. market stability amidst trade tensions and economic uncertainties. With attractive valuations in emerging markets, it’s clear that many Indian investors seek diversification opportunities beyond the U.S. landscape. The potential for growth in both China and Brazil suggests that this trend may continue, even amid ongoing concerns about tariffs and geopolitical risks.

Original Source: www.livemint.com