Buy the dip or wait it out: What should investors do as Indian stock market takes a breather?

After a strong two-day rally, Indian benchmark indices paused for breath on April 16, with the Sensex and Nifty trading flat during the afternoon session. Global cues weighed on investor sentiment, even as broader markets showed resilience. Midcap and smallcap stocks outperformed, gaining nearly 1 per cent, while the India VIX—a barometer of market volatility—fell another 3 per cent, hinting at cooling nerves on Dalal Street.

While domestic indices have managed to recoup losses from April 2, following the US’s 26 per cent reciprocal tariff announcement, the underlying tone remains cautious. Markets got an uplift after the US administration announced a 90-day pause on the implementation of the tariffs, providing some breathing room for investors. However, as tensions in global trade dynamics remain unresolved, particularly between the US and China, market watchers remain on edge.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that although the Nifty has recovered from its earlier losses, investors should resist assuming a smooth upward trajectory from here. He cautioned, “The market is indicating calm after the storm, but this may be temporary. With China halting exports of rare earths and cancelling Boeing orders, fresh volatility may arise from retaliatory measures in the ongoing trade war.”

Resilience of Consumption-Focused Stocks Offers Clues

One of the key observations from the recent rally has been the strong performance of domestic consumption stocks. According to Vijayakumar, companies like Bajaj Finance, Bharti Airtel, Indigo Airlines, and Eicher Motors have touched their 52-week highs, underlining investor preference for domestic stories insulated from global shocks. Meanwhile, IT stocks have lagged, reflecting their dependence on global revenue streams.

He added that the strength seen in banking heavyweights like HDFC Bank, ICICI Bank, and Kotak Mahindra Bank further reinforces the case for staying anchored to domestic demand-led sectors.

Tread Carefully, Focus on Fundamentals

Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, echoed a similar tone of caution. He advised investors to brace for volatility stemming from unpredictable global announcements, especially from the US. “Markets are adjusting to the new reality of daily Trump Twists and Turns,” Gupta said. He emphasized sticking to fundamentally strong companies—both domestic and global—and accumulating them during market dips based on conservative valuations.

Gupta also warned investors against holding weak companies in their portfolios, whether domestic or international. “Start exiting such stocks whenever a reasonable price is available,” he added.

Technical Levels to Watch

Shrikant Chouhan, Head of Equity Research at Kotak Securities, offered a near-term technical perspective. He believes the market is currently in a bullish phase but warned of profit booking at higher levels due to temporary overbought conditions.

Chouhan identified key resistance zones at 23,400 and 23,600 on the Nifty, and 76,900 and 77,600 on the Sensex. On the downside, support is expected around 23,100-23,200 for the Nifty and 76,100-76,400 for the Sensex. “If the market pulls back to these levels, it would be an ideal opportunity to accumulate stocks with a medium-term view,” he advised. For Nifty, he recommended buying between 23,100-23,200 with a stop loss below 23,000 on a closing basis.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.