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Summary: Ask investors where they like to play and the answers are predictable—small caps for thrills, large caps for comfort. Somewhere in between sit the mid-caps, often ignored as the market’s middle child. Yet, beneath that perception lies a story worth a closer look. Our quality and growth filters, combined with institutional backing, have unveiled 10 mid caps that are gathering mutual fund attention for the right reasons. Find the list below.
Ask a room full of investors about their favourite investing playground and the answers tend to split three ways. Some swear by small caps, those firecrackers of the market that can light up the sky (and sometimes fizzle out just as fast). Others find comfort in large caps—the anchors, the blue chips, the household names that keep portfolios steady when the seas get rough.
And then there are mid caps. Often dismissed as a middle child, mid caps are actually the sweet spot: companies large enough with proven business models but still small enough to keep growing at a healthy clip. If you’ve been ignoring them, you may have been ignoring the real engine of the Indian market’s wealth creation. Here’s why:
1) Mid caps have higher odds of success
History shows they’re more upwardly mobile than you’d guess. Over the last 25 years, roughly 17 per cent of mid caps went on to become large caps on average every five years. That’s almost one in six. By contrast, only about 10 per cent of small caps managed to climb to the mid-cap bracket.
Mid caps show higher chances of moving up the market cap ladder
|
Original bucket
|
Ending bucket | % per category* |
|---|---|---|
| Micro caps | Small caps | 9.88 |
| Micro caps | Mid caps | 0.189 |
| Micro caps | Large caps | 0.002 |
| Small caps | Mid caps | 10.075 |
| Small caps | Large caps | 0.242 |
| Mid caps | Large caps | 16.814 |
| *Average share of companies that moved up the market cap ladder every five years during the last 25 years | ||
In other words, mid-caps are more likely to move up the market cap ladder than their smaller peers. The likelihood that tomorrow’s blue chips could be hiding in today’s mid-cap basket is what makes this space irresistible.
2) They lead to handsome wealth creation
Mid caps stand out for their staggering outperformance, too. Over the past 25 years, mid caps delivered an average annual return of about 18 per cent in every five-year period. That’s comfortably ahead of the Sensex benchmark’s 11–12 per cent. For long-term investors, 18 per cent compounded over decades is a ticket to serious wealth. Remember that at 18 per cent, your money doubles roughly every four years.
3) They are not as volatile
Of course, higher returns usually come with higher risk. This is where many investors hesitate: aren’t mid-caps too volatile? Let’s look at the numbers. Over the last 20 years, the annual volatility across market categories (based on annualised daily returns using standard deviation) has been:
- Large caps: 20.97 per cent
- Mid-caps: 21.01 per cent
- Small caps: 21.57 per cent
This shows that mid caps are nearly as safe as large caps, less volatile than small caps and make returns that balance the two components. Simply put, with mid caps, you sign up for a slightly faster merry-go-round, not a roller-coaster. That’s an acceptable trade-off especially given their return edge.
How can you pick the best of them?
With hundreds of mid caps to choose from, picking winners can feel like a needle-in-a-haystack exercise. One shortcut is to watch what the smart money is doing. Mutual funds are the financial athletes of our markets—they have research teams, access to management and the discipline to back only businesses they believe in. When funds buy a mid cap stock, it usually signals that the company has passed a tough checklist.
Suggested read: 10 quality large caps mutual funds loaded up on recently
But this does not mean you should blindly copy them. Even professionals get it wrong and not all trades reflect conviction; sometimes they’re just a part of portfolio rebalancing.
The smarter way is to use fund activity as a starting point for your research, not the final word. More importantly, start with looking out for solid growth and quality track record before seeking fund favourites. Our guide below has done exactly that. We scanned the mid cap universe for:
- Five-year annual profit after tax growth of over 20 per cent
- Five-year median ROCE of above 15 per cent
This ensures we pick companies that have been growing earnings consistently and using capital efficiently. Only after applying these filters, did we check which mid caps from this pool saw the highest mutual fund buying during April–July 2025. The result was a shortlist of companies combining fundamental strength with institutional interest. For this story, we have listed the top 10 mid caps by highest fund interest (check table at the end) and given an overview of the top three.
PG Electroplast
PG Electroplast (PGEL) has quietly built itself into one of India’s most integrated contract manufacturers for consumer appliances. The company stands out for its backwards integration, covering plastics, sheet metal, controllers, PCB assemblies, tooling, and copper tubing, spread across 11 plants. This structure gives PGEL both cost efficiency and tighter control over supply chains, critical in the air-conditioner (AC) and washing machine markets it serves.
By FY25, product sales contributed over 70 per cent of revenue, with the room AC business alone accounting for more than Rs 3,000 crore. PGEL now supplies to over 35 AC brands and has built capacity to produce 2 million indoor and 1 million outdoor AC units annually. They are also diversifying with a television joint venture under the IT hardware PLI scheme.
Yet, the business is not without risks. Working capital intensity has increased: inventory days climbed to 88 in mid-2025 and the cash conversion cycle has also been increasing. The company is dependent on the overall demand cycle of white goods such as ACs and washing machines; any pressure in this segment will pressure margins. With competition intensifying, the company’s ability to convert capacity into sustained cash flows will be closely watched.
KEI Industries
KEI Industries has carved a strong position in India’s power cable sector, with a distinctive edge in extra-high-voltage (EHV) products. It is among the few Indian manufacturers capable of producing cables up to 400 kV, and its upcoming Sanand plant will triple EHV output. The facility’s location near ports is also designed to strengthen exports, which already reach over 60 countries.
The company’s business mix has steadily shifted towards retail, which now contributes more than half its revenue through a dealer network of over 2,000, while EPC exposure has been scaled down to preserve margins and working capital discipline. This transition and a Rs 4,000 crore-plus order book provide both stability and visibility.
Industry dynamics, however, are changing fast. India’s cable market is projected to grow in double digits, fuelled by rising electrification, infrastructure expansion and renewable integration. New entrants, including large players such as Aditya Birla, are expanding into this segment, intensifying competition. Alongside commodity price and currency risks, this competitive push could pressure margins and market share. KEI presently trades around 53 times earnings, which is at a premium to its peer Polycab trading at 49 times earnings.
ZF Commercial Vehicle Control Systems India
ZF Commercial Vehicle sits at the heart of India’s push for safer and smarter commercial transport. As India’s market leader in braking systems, with six plants and local R&D, it combines conventional strengths with newer technologies in autonomous, connected and electric mobility. Its portfolio is unusually wide—brakes, stability control, automated manual transmissions, telematics—giving it an edge as safety regulations tighten.
Beyond hardware, ZF is betting on digital solutions. Its SCALAR Evo Pulse that tracks a vehicle trailer’s real-time location and braking system data and helps fleet operators monitor trailer performance is a first in India. The company is also readying EV-compatible products such as electronic compressors and electronic brake systems.
Financially, it maintains a debt-free balance sheet—giving it room to invest through the cycle. The risks lie in its dependence on the cyclical commercial vehicle market and rising electronics-driven competition. Still, with a one-stop-shop portfolio and regulatory tailwinds, ZF is well placed to ride India’s transition towards safer, connected and electrified mobility.
That said, ZF trades at a P/E of 54 times, much higher than any auto component player. So, further rerating will depend on its ability to sustain growth where a CV down-cycle could compress multiples.
Mid caps catching the smart money’s attention
| Company | 5Y profit after tax growth (%pa) | 5Y ROCE (%) | Stock Rating (out of 5) | Mutual fund holding increase* (%) |
|---|---|---|---|---|
| ZF Commercial Vehicle | 23.7 | 19.1 | 4 | 2.68 |
| Kei Industries | 22.1 | 24.1 | 3 | 2.06 |
| PG Electroplast | 124.3 | 17.8 | 1 | 2.01 |
| PI Industries | 29.4 | 22.1 | 5 | 1.92 |
| Karur Vysya Bank | 52.6 | 16.2 | 4 | 1.58 |
| Blue Star | 30.7 | 26.3 | 3 | 1.42 |
| Elgi Equipments | 52.8 | 22.4 | 4 | 1.22 |
| Triveni Turbine | 26 | 42.2 | 3 | 1.12 |
| Apar Industries | 43.5 | 32.7 | 3 | 1.06 |
| Oberoi Realty | 26.5 | 16.3 | 3 | 1.04 |
| *Between April and July, 2025 | ||||
Want more such frameworks?
This is just one way we uncover tomorrow’s compounders. Wealth Insight, our monthly magazine, goes deeper, bringing you more such frameworks, time-tested strategies and carefully chosen stocks in every issue. If you want a steady supply of insights that help you spot opportunities before the crowd, subscribe to Wealth Insight and make disciplined investing your edge.
Also read: 10 potential compounders that blend growth, value and more
This article was originally published on September 11, 2025.
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