Expert Warns Against 'Buy on Dips' Strategy Amid Market Uncertainty

Market Volatility to Persist in Near-Term, Says HDFC Securities Expert

The Indian stock market has been highly volatile in recent times due to heightened geopolitical tensions, but according to Devarsh Vakil, Head of Prime Research at HDFC Securities, the worst of the correction appears to be behind us for now.

Earnings Season Surpasses Expectations

The earnings season so far has been broadly stronger than anticipated, with companies reporting results that are largely in line with or slightly above expectations. This has helped cap downside and reduce the risk of a significant market correction. Vakil believes that if crude oil prices remain contained and earnings revisions remain positive, the market can stage a near-term reversal, especially in sectors with visible growth.

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FII Outflows Continue

Foreign Institutional Investors (FIIs) have remained net sellers for more than a year, and Vakil believes that curtailing Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG) could help contain the outflow of foreign capital. However, he notes that FII behavior is primarily driven by global cues, and tax adjustments are not the dominant force behind capital flows.

Market Corrections Offer Opportunities

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Despite the volatility, Vakil believes that market corrections offer opportunities for long-term investors who use them to accumulate quality assets. He suggests that investors should adopt a highly selective accumulation approach, focusing on sectors with visible growth and strong balance sheets.

Sectors to Focus on in 2026

Vakil recommends focusing on select sectors that have delivered positive surprises this earnings season. Defence and Aerospace stand out, with companies reporting strong results underpinned by multi-year order visibility. Pharmaceuticals remain a favoured sector, though conviction is selective, and Midcap and Smallcap companies have reported reasonably healthy numbers.

Investment Strategy

Vakil suggests that investors should adopt a tactical, sector-specific playbook and focus on companies with a strong balance sheet and pricing power. He recommends utilising staggered Systematic Investment Plans (SIPs) and avoiding a blanket "buy on dips" strategy. Instead, investors should focus on high-quality names in the mid-cap and small-cap segments, which can deliver stronger upside in improving growth phases.