Brazil all set to Outperform India !Attached:
EWZ (MSCI Brazil ETF) vs. INDA (MSCI India ETF) Weekly Ratio Chart as of 14th May 2025
Technical Reasons:
- Brazilian Stock Market has been Underperforming Indian Stock Market since 2020 or roughly for 5 years
- Since last year June 2024 which was India's General Election year and also the same Month where Modi 3.0 won India's Election, since that date had you put money in both India and Brazil both countries have given on par returns
- However the entire period from June 2024 to May 2025 is an Accumulation Pattern signaling a Long Term Trend Reversal on the EWZ vs. INDA Ratio Chart
- The Ratio between the 2 Countries is also at a Multi Decade Low since 2012 and so the Odds for Mean Reversion to favor Brazil's Stock Market over India's Stock Market are high
Macro/ Fundamental Reasons:
- Geopolitics too says that Brazil (rather Latin America) has been positioning itself strategically to benefit from the Global Trade War between the 2 Super Powers USA and China. Meanwhile India has not been able to position itself to benefit in the New Geopolitical landscape in comparison.
- The Trend of US De- Dollarization benefits Latin America the most and Brazil is the largest economy of Latin America, this is reflected in the Currency Appreciation of the Brazilian Real
- CAPE Ratio for the Brazilian Stock Market is also in the Cheap territory while CAPE Ratio for Indian Stock Market is in the Expensive territory so the former is Undervalued while the Latter is Overvalued
Conclusion:
- Based on the above Thesis , one can expect the Brazilian Stock Market to Outperform the Indian Stock Market by a margin of 100% if not more in the coming few years
- One can expect the Ratio to get back at least to the Jan 2016 levels on a very conservative basis and the optimistic case would mean the Ratio gets back to the 2020 Jan high
