Sensex, Nifty outlook: Should investors buy the dip or stay cautious? Expert explains

With domestic benchmarks witnessing renewed selling after two weeks of gains, elevated crude oil prices, pressure on the rupee and foreign fund flows remain key factors for investors to watch. Mid-cap and small-cap stocks have also seen sharper corrections than frontline indices, while second-quarter (Q2 FY27) earnings have triggered stock-specific moves.

In this backdrop, investors are weighing whether to use market corrections as buying opportunities, maintain a wait-and-watch approach or reassess their asset allocation.

Adhil Shetty, co-founder and CEO of BankBazaar, shared his views on the ongoing market volatility, investment strategies and behavioural mistakes investors should avoid in the current market in an interaction with Business Today. Here are the excerpts:

Q. With Sensex and Nifty witnessing renewed selling after two weeks of gains, are investors turning cautious or shifting to a wait-and-watch approach?

Shetty: Markets moving in phases of gains and selling is normal, and right now high crude prices, a weaker rupee and patchy foreign fund flows may be keeping sentiment on edge. A short burst of selling after a rally doesn’t automatically mean the mood has turned negative. Give it a few weeks of trading rather than one session, and you’ll get a clearer read on whether this is genuine caution or just a pause before the next move.

Q. With elevated crude oil prices, pressure on the rupee and uncertainty over foreign investor flows, should retail investors use market corrections as an opportunity to buy stocks at lower levels?

Shetty: Corrections tend to be a normal part of how markets function, and pressures of this kind have shown up before in Indian markets and tended to ease over time. Whether this turns into a buying opportunity for you depends on your own goals, time horizon and appetite for risk, not on the headlines of the week. There is no single right answer here, only what suits your own plan.

Q. Mid-cap and small-cap stocks have seen sharper corrections than frontline indices recently. Are investors reducing exposure to these segments, or are they using the correction to accumulate stocks at lower levels?

Shetty: Mid- and small-cap stocks tend to swing harder than frontline names, in both directions, so a sharper fall here during a wider dip isn’t unusual. This part of the market has often rewarded patience, since how individual companies hold up can vary more widely once prices correct. It’s best to respond based on your own risk tolerance, not against what the rest of the market is doing.

Q. With volatility rising and second-quarter earnings triggering sharp stock-specific moves, how are investors balancing short-term trading opportunities with long-term investment goals?

Shetty: Earnings season often brings sharper, stock-specific swings, since a single result can move a share well beyond where the broader market is headed. For most individuals, staying anchored to a long-term plan tends to work better than getting drawn into reacting to every such move. Trading on these swings is a separate activity, best kept apart from your long-term investments, which are better judged over years, not one quarter.

Q. Amid persistent volatility, are investors moving towards safer assets such as bank deposits, gold and fixed-income instruments, or are they maintaining their equity allocations? What behavioural mistakes should they avoid in the current market?

Shetty: Phases like this often bring renewed interest in steadier options such as deposits, gold and bonds, usually alongside your existing equity holdings rather than replacing them. A mix across asset classes, shaped by what you’re saving for, tends to hold up better than keeping everything in one place. The mistakes worth avoiding are reacting to short-term noise, selling out of fear only to buy back higher later, and investing before you’ve set aside money for emergencies.