5 Undervalued Midcap Stocks to Watch Out in 2026

India's midcap market is entering a phase of quiet recalibration.

After years of exuberant valuations and rapid price discovery, moderation has set in. The excitement of the last rally is giving way to patience, forcing investors to distinguish between momentum and merit. This shift, though subtle, is healthy because it brings fundamentals back into focus such as profitability, cash flow strength and the ability to sustain growth through cycles.

The market is now rewarding consistency more than surprise and valuation comfort is returning in select pockets.

For discerning investors, this phase is not about chasing the next breakout but recognising resilience where others see stagnation.

As India's economy expands and sectors evolve, midcaps with strong balance sheets and credible management could quietly lead the next leg of the market's journey.

When we say 'undervalued', the below list includes a focus on companies trading at a discount to their five-year average P/E multiples, where current prices may not fully capture long-term potential. This is not a recommendation of any kind.

#1 AWL Agri Business

First on our list is AWL Agri Business.

AWL Agri Business, earlier known as Adani Wilmar, is among India's largest integrated food and agri-business companies.

Over the years, its Fortune brand has become a household name across edible oils, packaged foods and industry essentials. The company's rebranding marks a shift toward value-added food categories, aiming to reduce dependence on commodity cycles.

In FY25, the company's revenue grew 24%, led by firm pricing in edible oils and steady traction in food and FMCG. Volumes were flat but EBITDA margin.

Q1 FY26 showed sequential improvement as palm oil prices normalised and food segment margins strengthened.

The company continues to benefit from a diversified portfolio and remains focused on improving profitability across key segments.

In edible oils, the management expects per-ton EBITDA to stay within Rs 3,600-4,000, with 5-6% annual volume growth aided by stronger palm oil demand and lower import costs. The Food & FMCG segment is expected to deliver double-digit growth through FY26, supported by new capacities for rice and wheat flour and the ramp-up of the GD Foods acquisition. The company aims to scale its food business revenue from about Rs 61 bn to 70 bn and 100 bn by FY26 and FY27, respectively.

At about 31 times FY26 earnings, the stock trades at a steep 60% discount to its five-year median of 79 times. For investors seeking undervalued midcap stocks with improving margins and strong brands, AWL is one to watch in 2026.

To know more about the company, check out its financial factsheet and latest quarterly results.

#2 Cyient

Next on the list is Cyient.

Cyient is a global engineering and technology company that designs and builds digital systems for aerospace, mobility, energy and industrial clients.

Over the past three decades, it has evolved from a pure-play engineering services provider into a diversified digital solutions firm. It enjoys strong capabilities in design-led manufacturing and semiconductors.

In FY25, Cyient's group revenue grew 3% year-on-year, as global engineering budgets tightened. The DET (Digital Engineering and Technology) business, which contributes the bulk of revenue, reported a small decline. EBITDA margin came in at 15%, down 3% YoY, mainly due to weaker order intake and cost pressure from wage hikes.

The first half of FY26 showed early signs of recovery. Growth was led by the transportation and mobility business. Strategic units such as energy and mining saw temporary softness.

Looking ahead, Cyient expects a stronger second half of FY26.

This will come on the back of recovery in its transportation and mobility vertical and gradual margin improvement. Management guided for H2 revenue and profitability to be higher than H1, aided by a 10% sequential rise in the deal pipeline and benefits from its cost optimisation programme.

The company is targeting an EBIT margin of around 15% by Q4 FY27. Its semiconductor arm, which grew 12% quarter-on-quarter in Q2, is expected to reach a USD 50 million (m) revenue run rate and turn EBIT-neutral by FY27, with minimal capex funded internally.

At about 22.9 times earnings, the stock trades slightly below its five-year median of 24.3 times..

To know more about the company, check out its financial factsheet and latest quarterly results.

#3 Dr Lal PathLabs

Third on our list is Dr Lal PathLabs.

Dr Lal PathLabs is one of India's leading diagnostic chains, offering pathology and radiology tests through a strong national network.

The company operates 298 labs and more than 6,600 patient service centres, serving nearly 29 m patients annually. Its growth strategy focuses on expanding into smaller towns while maintaining leadership in metro markets.

In FY25, consolidated revenue grew 10.5% driven by higher sample volumes. EBITDA margin improved to 28.3% from 27.4% in FY24, reflecting cost efficiency and a better test mix. The company added 18 new labs and 800 collection centres during the year, strengthening its hub-and-spoke network. The SwasthFit preventive health packages, which accounted for 24% of total revenue, continued to outpace overall growth.

This momentum carried into FY26. In Q1 FY26, revenue rose 11% year-on-year. EBITDA margin expanded to 31%, aided by improved mix and disciplined cost management.

Going forward, Dr Lal PathLabs has guided for 11-12% revenue growth in FY26, supported by expanding sample volumes and a better test mix. The company plans to add 18 new labs this year, focusing on Tier-3 and Tier-4 towns while strengthening metro networks. Management expects full-year EBITDA margin to hold near 27%, with gross margin at 79-80%, aided by a higher share of SwasthFit preventive packages.

With Rs 13.9 billion (bn) in cash reserves, Dr Lal PathLabs remains debt-free and is funding its network expansion and selective acquisitions, particularly in southern India, through internal accruals.

At about 49 times FY26 earnings, the stock trades at a discount of 30% to its five-year median of 70 times.

To know more about the company, check out its financial factsheet and latest quarterly results.

#4 KPIT Technologies

Fourth on our list is KPIT Technologies.

KPIT Technologies has carved a strong niche in automotive software, powering the global shift toward software-defined and AI-led mobility. The company works with top global OEMs across passenger and commercial vehicles, building platforms for connected, electric and autonomous systems.

In FY25, the company's revenue grew 20% year-on-year in constant currency, driven by demand for its middleware and connected solutions. EBITDA margin improved to 21%, supported by higher offshoring and operational efficiency. Strong client relationships and 19 straight quarters of revenue growth reflect its execution discipline.

This momentum held steady in FY26. In Q1 FY26, the revenue grew 7.8% year-on-year in dollar terms and 12.8% in rupee terms, with EBITDA margin stable at 19%. The company signed new deals worth US$241 m, mainly in powertrain and connected mobility across the US and Europe.

Looking ahead, the management expects stronger growth in the second half of FY26, led by large program ramp-ups and new opportunities in India and China.

KPIT's investments in "mobility-infused AI" and partnerships such as JSW Motors are driving the next phase of growth. These initiatives are designed to improve client productivity and deepen engagement with global automakers while maintaining margins near 21%.

At around Rs 1,176, the stock trades near 40 times earnings, well below its three-year median of 58 times.

To know more about the company, check out its financial factsheet and latest quarterly results.

#5 Indian Energy Exchange

Last on our list is Indian Energy Exchange.

Indian Energy Exchange is India's leading power trading platform, offering a transparent marketplace for electricity, green power and renewable certificates. Its asset-light, technology-driven model has made it a vital part of India's energy ecosystem, connecting discoms, generators and industrial consumers in real time.

In FY25, revenue grew 20% year-on-year, supported by higher electricity demand and strong traction in the real-time market. The segment's share in total volume crossed 25%, marking a shift toward shorter-duration trades. EBITDA margin stayed stable at 84%, reflecting the company's highly efficient cost structure and stable transaction-fee model.

Profitability improved further in H1 FY26, as both day-ahead and term-ahead markets witnessed higher liquidity. Renewable and certificate trading volumes also picked up sharply, helping offset a soft industrial demand base in the early part of the year.

Looking ahead, IEX plans to enhance its technology backbone and launch new market products in green energy, capacity trading and storage. The focus is on scaling participation and improving system resilience.

The company remains debt-free, with investments funded entirely through internal accruals. Policy tailwinds such as open access for green power and energy storage incentives are expected to expand market opportunities over the next few years.

At around 26.5 times FY26 earnings, the stock trades at a 37% discount to its five-year median of 42.1 times. With strong margins, steady cash generation and a dominant industry position, IEX fits well among undervalued midcap stocks to watch out for in 2026.

To know more about the company, check out its financial factsheet and latest quarterly results.

Conclusion

Undervalued doesn't always mean overlooked - or risk-free.

Some midcaps trade at a discount because they're rebuilding, while others simply haven't caught the market's attention yet.

The key for investors is to look beyond short-term sentiment and focus on business quality, balance sheet strength and management intent.

These companies may not deliver overnight gains, but they have the ingredients for steady compounding if they continue to execute well.

In a market that rewards resilience as much as growth, staying patient and selective could be the difference between catching a temporary bounce and owning the next phase of long-term wealth creation.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...