Suppose, I want to access a file in a folder that is not in my PATH, say, /home/Music/Artist1/Album2.

I start krunner, type '/'. It does not show multiple options. Even after typing '/h', it does not auto-complete. Wish it could autocomplete '/h' to '/home/'.

Is there any way to get this behaviour?

Not that I know of. Instead I recommend that you try fsrunner, then you can just type e.g. 'alb' and it'll show all files and directories matching it.

There are two plugins in krunner (both enabled in my case): Location and Path.

Are they not supposed to provide the autocomplete fuctionality??

I don't have the Path runner on my system, so I cannot comment on that one.

For the Location runner, it does not appear to support anything but exact path matches - ie. it does not support auto completion.
This is probably not helped by the KRunner architecture, which if I recall correctly does not allow for runners to provide auto completion results.