Stock market strategy: Buy on dips or sell on rallies? Here’s what experts recommend

The Indian stock market traded with heightened volatility on Monday, erasing early gains as profit booking at higher levels weighed on sentiment amid mixed global cues.

The benchmark BSE Sensex was down nearly 0.5%, while the NSE Nifty 50 slipped below the 24,000 mark. Although the Nifty has gained nearly 2% over the past month, it remains around 8% lower on a year-to-date (YTD) basis.

Globally, investor sentiment has improved as geopolitical tensions in the Middle East continue to ease, supported by ongoing US-Iran peace talks. The sharp correction in crude oil prices — from nearly $120 per barrel to around $70 per barrel, levels seen before the conflict escalated — has further boosted optimism.

Crude oil supply through the Strait of Hormuz has largely normalised, easing concerns over energy prices and inflation.

However, lingering uncertainty surrounding the fragile US-Iran peace deal, expectations of a US Federal Reserve rate hike, and continued foreign portfolio investor (FPI) outflows remain key headwinds for the domestic market.

Against this backdrop, should investors adopt a ‘buy on dips’ or ‘sell on rallies’ strategy? Here’s what market experts suggest.

Buy on dips remains the preferred strategy

Sunny Agrawal, Head of Fundamental Research at SBI Securities, believes the current market environment favours a “buy on dips” approach, supported by easing geopolitical tensions and cooling crude oil prices.

“Alongside this, pressure on the USD/INR exchange rate has eased following several measures announced by the RBI to stabilise the currency and encourage capital inflows. As a result, most of the key macroeconomic concerns for the Indian economy have been largely addressed,” Agrawal said.

FY27 earnings outlook remains positive

According to Agrawal, elevated crude oil prices during the first quarter of FY27 may lead to temporary margin pressure, impacting Q1 earnings. However, he expects the weakness to be short-lived.

“If crude oil prices remain in the $70 - $75 per barrel range for the rest of the year, the remaining nine months of FY27 could witness strong earnings growth,” he said.

Agrawal expects Nifty 50 companies to deliver double-digit earnings growth for the full fiscal year.

He also advised investors to look beyond the benchmark index.

“Rather than focusing solely on Nifty 50 stocks, investors should consider companies outside the index that are delivering robust earnings growth. Attractive opportunities currently exist across large-cap, mid-cap and small-cap segments,” he added.

Technical Outlook

According to Aakash Shah, Technical Analyst at Choice Broking, the broader technical structure of the Indian stock market remains constructive despite the recent consolidation.

The Nifty 50 failed to sustain above the falling resistance trendline connecting the April and June swing highs and also closed below its 100-day exponential moving average (EMA). However, Shah noted that the index continues to trade above its key short- and medium-term moving averages.

“The higher high-higher low formation on the daily chart suggests that the primary trend remains positive. Momentum indicators also remain supportive, indicating that the ongoing consolidation is a pause within the broader uptrend rather than a reversal,” Shah said.

He expects the 24,000 level to provide immediate support, followed by 23,777 as a crucial support zone. As long as the Nifty 50 holds above these levels, the broader bullish structure is likely to remain intact.

On the upside, the 24,200 - 24,250 zone remains the immediate hurdle. A decisive breakout above this range could trigger a rally towards 24,500 - 24,600.

Bank Nifty Outlook

Shah believes the Bank Nifty continues to display relative strength after its recent breakout.

Immediate support is placed in the 57,700 - 57,600 zone, while 57,222 remains the key positional support. On the upside, resistance is seen in the 58,500 - 59,000 range. A sustained move above this zone could push the Bank Nifty index towards 59,200 - 59,500.

He added that momentum indicators continue to support the bullish view. The RSI remains comfortably above 60, reflecting healthy buying momentum, while the MACD maintains a bullish crossover. Although intermittent profit booking cannot be ruled out following the recent rally, there are no major technical signals pointing to a trend reversal.

“From a trading perspective, the preferred strategy remains ‘buy on dips’ rather than chasing prices after sharp rallies. Traders should consider accumulating quality stocks or initiating long positions near key support levels with disciplined stop-losses. Fresh aggressive buying near resistance should be avoided until a decisive breakout is confirmed,” Shah said.

According to Shah, the overall technical bias remains positive. Selling on rallies should be restricted to tactical profit booking near resistance levels rather than adopting an outright bearish stance, as long as the Nifty 50 remains above 23,777 and Bank Nifty holds above 57,222.

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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.