Are midcap funds too risky right now due to high PE multiples?

Published 2 October 2026

Rathan from Hyderabad

I am looking to deploy about Rs 5L into the market over the next 1yr.

Everyone is criticizing the mid and small-cap segments because their PE multiples are hovering around 25x to 30x.

Should I stick entirely to large caps, or is there a case for midcaps despite the high valuations?

Sachin Kabra ex-Director HDFC Private Wealth, Business Head Motilal Oswal AMC LinkedIn

While it is true that the PE of the Indian market has been upwards but multiples of 25x to 30x cannot be sustained without underlying growth, ignoring midcaps means missing out on the "India of the future." Following recent economic adjustments and consumption increase steps, India may be at the beginning of a robust earnings growth cycle. If earnings catch up as expected, these elevated multiples will naturally iron themselves out.

More importantly, the definition of "midcap" in India strictly refers to companies ranked 101 to 250 by market capitalization. The largest midcap companies today boast market caps exceeding Rs 1.2L crore; these are not unproven, fragile businesses.

The sectors driving India's future, such as healthcare, hospitals, and capital markets, are predominantly found in the midcap space. Conversely, the large-cap universe is heavily concentrated in traditional sectors like IT, energy, and metals, making midcap exposure essential for a forward-looking portfolio.

Disclaimer: All information shared above are strictly for educational and informational purposes only. It should not be construed as financial or investment advice.

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