Global view- preferred markets for medium-term stock investment (next 3 years)

 Preferred markets for medium-term stock investment (next 3 years) emphasize a balance of earnings growth potential, reasonable valuations relative to history or peers, structural tailwinds, and manageable risk. 

Global views from major institutions consistently highlight that pure US large-cap concentration offers solid but more moderate expected returns after recent strong runs and elevated valuations, while non-US markets often present better relative risk-reward due to discounts, broadening earnings, and potential currency effects. 

Returns are never guaranteed and depend on economic conditions, geopolitics, and individual stock selection. Focus remains exclusively on equities.

Tier 1 – Highest relative preference (attractive growth prospects with fair risk)

These markets combine structural or cyclical drivers, improving fundamentals, and valuations that leave room for decent upside without extreme concentration or policy fragility.

India: Strong domestic consumption and investment cycle, policy support (tax and GST measures, monetary easing), robust long-term demographics and infrastructure/manufacturing push. Earnings expected to recover into mid-teens growth after a softer period; valuations have become more reasonable versus history and peers. Domestic liquidity remains supportive. Risk is moderate for an emerging market due to lower external dependence, though sensitive to oil prices and global trade.

Japan: Corporate governance reforms, share buybacks, improving capital efficiency, and fiscal/policy support. Attractive valuations relative to developed peers and exposure to industrials, banks, and select technology/supply-chain resilience themes. Currency dynamics and moderate growth provide a constructive backdrop. Risk is relatively contained among developed markets.

Europe (select developed markets, particularly core eurozone and UK): Significant valuation discount to the US, narrowing earnings growth gap, and tailwinds from defense, infrastructure, fiscal spending, and banks. Cyclical recovery potential and lower concentration risk than pure US tech. Risk is fair for developed markets, with sensitivity to energy prices and growth momentum.

Taiwan and South Korea: Direct beneficiaries of the multi-year AI and semiconductor demand cycle, with very strong projected earnings growth in the near term. Valuations remain reasonable relative to growth. These are higher-conviction within Asia for technology hardware exposure. Risk is elevated due to sector concentration and geopolitical factors but still viewed as manageable given global tech demand.

Tier 2 – Solid core or selective opportunities (decent returns possible with balanced risk)

Useful for diversification and liquidity, though expected returns may be more moderate or require greater selectivity.

United States: Continues to benefit from AI-related capital expenditure, resilient corporate earnings, and high-quality large companies. Prefer value-oriented, small- and mid-cap, or broader market exposure over pure mega-cap growth given current valuations. Liquidity and depth remain unmatched. Risk is moderate overall but includes concentration and valuation sensitivity; absolute returns may lag some non-US peers on a relative basis over three years.

China (selective): Attractive valuations, improving technology and exporter earnings outlook, and potential from AI-related manufacturing and domestic policy support. Focus on quality tech, industrials, and exporters rather than broad market. Risk is higher due to policy, property sector legacy issues, and geopolitics, so position size should be limited.

Lower preference or approach with caution

Broader emerging markets outside the names above can offer higher expected long-term returns in some forecasts but come with greater volatility, currency risk, and sensitivity to global growth or commodity swings. Avoid or minimize pure frontier markets or those with acute political/debt instability for a “fair risk” mandate.

Overall approach: A diversified equity allocation overweighting Tier 1 markets (India, Japan, select Europe and Asia tech) while maintaining a meaningful US core and selective China exposure offers a reasonable chance of solid mid-single to low-double-digit annualized returns over three years under base-case global growth scenarios, with risk diversified across regions and themes (AI infrastructure, domestic demand, corporate reform, fiscal spending). Currency movements (especially a softer US dollar) could provide an additional tailwind for non-US holdings. Regular rebalancing and focus on quality companies with sustainable earnings remain essential.

Preferred sectors in India (excluding banking and finance)

Strong candidates for the medium term (next 3 years) centre on structural domestic demand, policy support (PLI schemes, infrastructure push, energy transition), earnings visibility, and reasonable-to-attractive valuations relative to growth. Key areas include:

Healthcare (hospitals, diagnostics, select pharma/medical devices): Rising insurance penetration, capacity shortage (beds per capita well below global norms), ageing demographics, medical tourism, and consolidation. Private hospital chains are expanding aggressively into tier-2/3 cities.

Manufacturing, capital goods, and industrials: Benefiting from China+1 supply-chain shifts, government capex, PLI incentives, and private investment revival. Sub-segments such as electronics manufacturing services (EMS), precision engineering, and industrial equipment show multi-year order books.

Defence and aerospace: Indigenisation drive, rising budget allocations, large order backlogs, and export ambitions. High visibility from multi-year contracts.

Power, transmission, renewables, and energy storage/utilities: Grid modernisation needs to support renewables and rising electricity demand (including data centres and electrification). Transmission InvITs and related infrastructure offer contracted cash-flow visibility.

Consumer discretionary and durables (select): Premiumisation trends, GST-related demand boosts in certain categories, and urban/rural recovery potential. Focus on quality names rather than broad FMCG staples.

Electronics and semiconductor-related manufacturing: Policy-backed localisation and global demand for components/systems.

Selective metals & mining and auto/EV ecosystem: Commodity and mobility themes with cyclical upside, though more volatile.

These align with domestic cyclical recovery, infrastructure spending, and self-reliance themes. Avoid or be highly selective in pure export-heavy IT services (demand recovery uneven), certain cyclical energy/oil marketing companies, and overvalued pure-play consumer staples where volume growth has been muted.

Where foreign funds are putting money — analysis and sector stratification

KKR’s recent and ongoing activity is representative of broader private-equity (PE) and institutional foreign capital trends. KKR is acquiring the full Indian hospital business of Medicover (enterprise value around €1.2 billion / roughly ₹13,000+ crore range, its largest recent healthcare deal in India). This continues PE platform-building in hospital chains (capacity expansion, clinical capabilities, tier-2/3 reach). Separately, KKR has long been deeply involved with IndiGrid (power transmission InvIT): it acts as sponsor/co-sponsor historically, owns the investment manager, and has facilitated capital raises, asset acquisitions (transmission lines, solar, battery storage), and stake adjustments. This reflects preference for regulated, contracted infrastructure cash flows in the power value chain.

Broader foreign fund patterns (PE/VC and FPI/FII flows) reinforce the same themes, even amid overall equity outflows in parts of 2025–26:

PE has deployed heavily into healthcare delivery platforms (hospitals, diagnostics) for consolidation and capacity addition, plus infrastructure/renewables (transmission InvITs, RE platforms, data centres, highways). Recent months showed strong PE-VC activity in infrastructure and renewable energy deals.

FPI sectoral flows have been selective: net interest or relative resilience in capital goods/industrials, metals & mining, healthcare (intermittent), consumer services/durables, and utilities/power-related at various points. Outflows have been heavier in IT, certain autos, and FMCG during risk-off periods. Cumulative interest has favoured industrials, metals, and infrastructure-linked names amid the broader rotation.

Stratified sectors from the foreign-fund perspective (highest conviction to selective)

Tier 1 — Strong foreign capital interest and structural alignment

Healthcare (especially hospitals and organised delivery) and power/transmission/renewables/infrastructure. These match KKR-style platform investments: scalable domestic demand or contracted assets, policy tailwinds, and room for operational value creation. PE sees multi-year capacity and consolidation opportunities; InvIT structures attract long-duration capital seeking yield and visibility.

Tier 2 — Consistent or growing foreign allocation with policy support

Manufacturing/capital goods/industrials (including EMS and defence-linked) and select consumer discretionary/services. Foreign funds rotate here for China+1, PLI, and domestic capex themes. Defence benefits from order visibility; industrials from infrastructure and private investment cycles. Consumer pockets gain from premiumisation and recovery.

Tier 3 — Selective or tactical foreign interest

Metals & mining (commodity cycles and domestic demand), auto/EV ecosystem (mobility transition), and data-centre/digital infrastructure (AI-related power and real-estate plays). These attract flows when global or domestic catalysts align but carry higher cyclicality or concentration risk.

Lower relative preference for pure foreign equity flows currently

Broad IT services (valuation and demand concerns in some periods) and traditional consumer staples (volume softness). These see more selling or underweighting by FPIs relative to the themes above.

Overall, foreign capital (especially PE) prioritises domestically anchored, policy-supported sectors with visible earnings or cash-flow growth and consolidation potential over pure cyclical or export-dependent plays. Healthcare and power/transmission infrastructure stand out as the clearest matches to the KKR examples, followed by manufacturing/industrials. Position sizing should still account for valuation levels, execution risks in capacity expansion, and global macro sensitivity.