The global economy has entered a more uncertain phase in 2025. Developed markets are slowing under the weight of higher interest rates, sticky inflation, and geopolitical uncertainty. Yet, a new set of emerging markets is quietly outperforming expectations—and drawing growing interest from global investors. From India’s tech-driven boom to Vietnam and Mexico’s rise as China+1 manufacturing hubs, the story of emerging market resilience is more nuanced—and more investable—than ever.
India’s Economic Momentum Is Outpacing Expectations
India is emerging as one of the brightest spots in the global economy. While China’s post-pandemic recovery has been uneven, India has delivered consistent growth, with GDP projected to expand above 7% in 2025. The performance of the National Stock Exchange (NSE) reflects this confidence. Benchmarks like the Nifty 50 and Nifty Next 50 have reached record highs, propelled by gains in banking, infrastructure, tech services, and consumer sectors.
The Modi government’s policy reforms—including increased capital expenditure, digital infrastructure rollouts, and a national push for domestic manufacturing under “Make in India”—have fueled investor optimism. Notably, India’s inclusion in global bond indices and growing inflows from foreign institutional investors (FIIs) underscore its increasing relevance in international portfolios.
For retail investors, the story is just as compelling. India has witnessed a surge in domestic trading accounts, and mutual fund SIPs (Systematic Investment Plans) continue to grow monthly. This expanding retail base provides a level of demand resilience rarely seen in other emerging economies.
Vietnam and Mexico: Rising Stars in the China+1 Strategy
As global supply chains adapt to U.S.-China tensions, companies are diversifying their manufacturing bases beyond China. Vietnam and Mexico have emerged as key beneficiaries of this “China+1” strategy—and the economic data backs it up.
Vietnam’s exports remain robust despite global trade headwinds, with electronics, garments, and furniture continuing to drive foreign direct investment (FDI). The country’s pro-business stance, youthful population, and ongoing trade deals—including the EU-Vietnam Free Trade Agreement—make it an attractive destination for global manufacturers seeking reliability and cost-efficiency.
Mexico’s advantage is more geographic. Proximity to the United States, USMCA trade protections, and an expanding industrial base have allowed it to attract investments from automakers, electronics firms, and logistics providers. Nearshoring trends are only accelerating in 2025, particularly in regions like Nuevo León and Baja California, where industrial park activity is booming.
Both countries, though at different development stages, share one important quality: policy stability and openness to trade. In a world increasingly fractured by protectionism, that makes them rare and valuable bets.
Sector Snapshots: Who’s Leading the Growth Charge?
Emerging markets are rarely monolithic. Different sectors within these economies are seeing varying levels of investor interest—and performance.
In India, financial services and consumer staples continue to lead the charge. Private banks like HDFC and ICICI are benefiting from robust credit demand and improving asset quality. Meanwhile, FMCG giants are riding rural demand recovery and urban consumption growth. The technology services sector, led by Infosys and TCS, remains a reliable export engine, although wage pressure and global tech budget cuts have slightly tempered margins.
Vietnam’s standout sectors include electronics manufacturing (Samsung is a top employer in the country), textiles, and logistics. Domestic retail and financial services are also on the radar as the middle class expands.
Mexico’s growth is led by industrials, auto production, and logistics. U.S. EV and semiconductor reshoring have boosted demand for precision manufacturing and cross-border warehousing services. In particular, the border city of Tijuana has seen an influx of tech manufacturing firms seeking skilled labor and proximity to the U.S. market.
ETFs and ADRs: Practical Ways to Invest in These Markets
For international investors seeking exposure to these growth stories, there are a variety of exchange-traded funds (ETFs) and American Depositary Receipts (ADRs) that offer a diversified or direct route.
In India, the iShares MSCI India ETF (INDA) and WisdomTree India Earnings ETF (EPI) provide broad-based exposure. For more sector-specific bets, investors might consider the VanEck Digital India ETF, which targets tech and fintech. ADRs such as Infosys (INFY) and Wipro (WIT) allow targeted investment in Indian IT majors.
Vietnam exposure can be trickier due to capital controls, but the VanEck Vietnam ETF (VNM) remains a popular choice. It includes holdings in finance, real estate, and consumer companies. Some investors also gain indirect exposure through regional ETFs with heavy Vietnam weighting, such as ASEAN-focused funds.
Mexico is more accessible via the iShares MSCI Mexico ETF (EWW), which provides a cross-sector view of the market. For stock-specific exposure, ADRs like Grupo Aeroportuario del Pacifico (PAC) and Cemex (CX) offer plays on infrastructure and materials.
Risks to Watch: Currency, Politics, and Volatility
Emerging markets come with unique risks. Currency fluctuations can erode returns—especially when the U.S. dollar strengthens, as it has during recent rate hikes. While India’s rupee has been relatively stable, Vietnam’s dong and Mexico’s peso have seen bouts of volatility.
Political risk is another concern. While India enjoys relatively stable governance, Vietnam’s opaque regulatory framework and Mexico’s 2024 political transition could introduce new variables. Investors must remain alert to headlines, policy shifts, and central bank maneuvers.
Market volatility also remains higher in EMs. These markets can suffer outsized drawdowns during risk-off cycles, making them unsuitable for the faint of heart. However, with higher risk often comes higher reward—and current valuations in many of these markets are still attractive compared to their developed market peers.
Long-Term Themes: Demographics and Digitalization
Beyond the short-term momentum, the real case for emerging markets lies in long-term structural trends. Chief among them is demographics. India, with a median age of 28, will add millions to its working-age population over the next two decades. This creates a virtuous cycle for productivity, consumption, and innovation.
Vietnam’s young population and improving education system provide similar promise. Mexico’s labor force remains competitive, especially in technical roles increasingly needed by U.S. firms reshoring production.
Digitalization is another tailwind. India’s Unified Payments Interface (UPI) has transformed retail finance. Vietnam’s e-commerce and fintech startups are drawing interest from global VCs. Mexico’s digital banking push is reducing friction in remittances and credit access.
These foundational shifts—combined with favorable policy, reform momentum, and foreign capital—suggest that the emerging market bull story in 2025 may just be getting started.
How to Build an EM Portfolio: Practical Tips
Building a portfolio around emerging markets requires a balanced approach. Experts recommend starting with a diversified ETF for broad exposure, then layering in targeted country or sector picks based on conviction and risk tolerance.
Rebalancing frequently is key. EMs move fast and are highly sensitive to macro conditions like U.S. interest rates, oil prices, and global trade trends. Currency-hedged products can reduce risk, while dollar-cost averaging can help smooth entry points.
Investors should also consider combining EM equities with EM bonds, especially in countries with declining inflation and accommodative monetary policy. India’s sovereign bonds, for example, are gaining foreign inflows due to expected index inclusion.
Finally, while active funds often struggle to beat benchmarks in developed markets, many EM fund managers deliver alpha due to on-the-ground knowledge and local expertise. It’s worth evaluating a blend of passive and active strategies in the emerging market space.
Conclusion: A New Era of EM Outperformance?
In a world where developed markets face structural stagnation, emerging markets are rewriting the narrative. India, Vietnam, and Mexico are showing that with the right mix of demographics, reform, and global integration, growth doesn’t have to be a victim of global slowdown. For investors willing to look beyond headlines and volatility, these markets offer real potential—not just for returns, but for exposure to the future of global demand.
