Midcap stocks ignore Middle East war, AI worries to jump up to 85% in 2026. More rally or sharp correction ahead?

Despite a weak first half for benchmark indices, India's midcap stocks outperformed, driven by resilient domestic inflows, stronger earnings and sectoral tailwinds. Analysts expect the momentum to continue, although elevated valuations, geopolitical risks, crude oil prices and the sustainability of domestic fund flows remain key factors to watch.