Investing in Emerging Markets Amid Global Slowdown

By Hitender Tanwar, Franchise Partner, Motilal Oswal Financial Services Ltd. | June 25, 2025

Global growth is projected to slow to 3.0% in 2025 (IMF, April 2025), but emerging markets (EMs) like India, Vietnam, and Indonesia offer growth opportunities. This blog explores why EMs remain attractive, risks to consider, and strategies for Indian investors. Start your journey at Open an Account.

Why Invest in Emerging Markets?

EMs are projected to grow at 3.7% in 2025, outpacing advanced economies (1.3%). India’s 6.8% growth leads the pack, driven by consumption and reforms. Key Drivers:

Demographics: Young populations fuel consumption and labor growth.
Digital Transformation: Fintech and e-commerce boom in EMs.
Policy Reforms: India’s PLI scheme attracts global investment.

The MSCI Emerging Markets Index rose 3.81% YTD (March 2025), outperforming the S&P 500’s -4.30%.

Risks to Consider

EMs face challenges, including:

Trade Tensions: U.S. tariffs on China disrupt EM supply chains.
Currency Volatility: The U.S. dollar’s weakening (June 2025) impacts EM currencies.
Debt Pressures: High debt in low-income EMs limits fiscal space.

Investment Opportunities

1. India: Focus on IT (TCS), banking (HDFC Bank), and renewables (Adani Green). Tip: Use multi-cap funds.
2. Southeast Asia: Vietnam’s export growth (textiles, electronics) is promising. Tip: Invest via ASEAN-focused ETFs.
3. Latin America: Brazil’s commodity exports benefit from global demand. Tip: Consider commodity ETFs.