Nifty, Sensex fall nearly 9% in one month; should you buy the dip—What should investors do?

The domestic equity market is under tremendous pressure and has been witnessing a massive sell-off in the past few weeks. Domestic equity benchmarks have corrected around 9% in the past one month. The market has closed on a negative note in the last three consecutive sessions, and was still trading with more than half per cent cuts on Wednesday. Apparently, the headline indices closed in the green only on one occasion out of 6 trading sessions this month till May 10. The broader Nifty50 ended marginally higher by 0.03% on May 5 last week.  

Though Indian market has been doing well in comparison to most of its global peers, but have corrected significantly recently. As the market continues to hang in the balance, experts largely feel that it is not conducive time to take any aggressive position in the market given the discount it offers. They were of the view that fundamentally sound stocks should be bought in a very limited quantity and cheap stocks in the ongoing market turmoil.  

Sustained buying by DIIs and retail investors is imparting resilience to the market even when FPIs continue to be in the sell mode, says V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

"An unhealthy trend in the market is retail investors chasing low-grade cheap stocks. The only sensible strategy in this highly volatile environment is to buy small quantities of high-quality stocks for the long-term and refrain from speculation," he suggested.  

Amit Pamnani, Chief Investment Officer, Swastika Investmart Ltd, though feels this is one of the best time to invest in equities, but underlines that preference should be given to fundamentally sound stocks.  

"One of the best times to invest in stocks is during market falls and uncertain periods. In the current scenario, where the environment is full of uncertainty and negative sentiments, I believe it is the best time to add stocks that have good fundamentals, growth visibility, competitive advantages and are available at reasonable valuations," says Pamnani.  

India is currently in a better position in terms of economic strength compared to its peers and in the medium to long term, the economy facing stocks like banking, infrastructure, capital goods, and housing are poised to outperform other sectors, he says.  

"We recommend investors to take advantage of current market falls to buy quality names & fundamentally sound companies," he adds.  
We reiterate our bearish stance on the markets in the absence of any positive trigger, says Ajit Mishra, VP - Research, Religare Broking Ltd.  

"Besides, stability on the global front is equally critical for any sustained move. Meanwhile, since most of the sectors are trading under pressure, the focus should be on stock selection and using intermediate rebound to create shorts," he adds.  

As per Vijaykumar, three trends stand out in the ongoing bear phase in the market.  
One, India is outperforming in comparison to Nasdaq and S&P 500, which are down 27% and 17% from the peak, while Nifty is down around 12%.  

Two, large-caps are outperforming mid-and small-caps: Small-cap and Mid-cap indices are down 24% and 17% respectively from the peak while Nifty is down only 12%.  Three, value is outperforming growth.
 
Meanwhile, the broader Nifty 50 slipped below 16,100 and the Sensex shed nearly 700 points amid volatility in the market. Midcap and small cap stocks were under tremendous pressure as the indices corrected up to 4% in the afternoon trade. Sectorally, banking, metal, media, IT and realty stocks witnessed maximum sell-off​