India Mid-Caps: Is the "animal spirit" reviving?

Research evidence excerpt

India Mid-Caps: Is the "animal spirit" reviving?

Global Research

19 July 2026ab

India Mid-Caps Equities

IndiaIs the "animal spirit" reviving?

Building Materials

Shaleen Kumar

Nifty Midcap Index reaches a new high; what's driving the rally? Analyst

In early 2026 in our Key ideas for 2026, we expected the Nifty Midcap 100 Index to shaleen.kumar@ubs.com

rebound after a weak 2025, consolidate, and then for momentum to continue. Our view +91-22-6155 6065

has somewhat played out, as SMIDs did consolidate at the start of the year. However, the Angad Saluja

rebound after consolidation is sharper than we anticipated. Qualitatively, we note Associate Analyst

enquiries to UBS from inbound FII about SMIDs have increased in the past two months angad.saluja@ubs.com

after being largely absent since early 2025, possibly reflecting a search for alternatives to +91-22-6155 6174

Asian AI trades. In terms of valuation, the Midcap Index one-year forward PE has re- Raksha Saraf

rated (+14% YTD) and is now in line with the five-year-average. Driving the rally is Associate Analyst

domestic fund flow (Figure 6NetinflowintofundswithSMIDexposureremainedstrongin2025) that continues to support SMIDs, although we note a raksha.saraf@ubs.com

slight moderation in growth rates in the six months YTD. Our analysis also indicates +91-22-6155 6041

domestic fund managers are pivoting from large caps to SMIDs after moving away in Abhilash Chowdary Bobbur, PhD

2025, which may continue to support the segment. We prefer a bottom-up or sector- Strategist

specific approach. An analysis of the 20 segments (Figure 10Sub-sectors'curentone-year-forwardEV/EBITDAvs.long-termaverage) that consist predominantly abhilash-chowdary.bobbur@ubs.com

of SMIDs, such as chemicals, home improvement and exchanges, is a mixed bag.