Buy the dips or sell the rallies? Ajit Mishra reveals how to play markets

Amidst rising market volatility driven, primarily, by heightened geopolitical tensions and reciprocal tariffs, Ajit Mishra, senior vice president – research at Religare Broking, shares his insights in an email interview with Kumar Gaurav on the outlook for Indian equity markets, emerging markets, foreign investments, corporate earnings of India Inc., and valuation concerns. Edited excerpts:

Are the markets headed for a consolidation phase? What are the key levels you are tracking on the Sensex and the Nifty? Should one buy the dips or sell the rallies?

Markets have been rebounding for the last two months, after correcting for nearly seven months. However, tariffs and its impact on world trade, updates on potential trade deals, combined with geopolitical scenarios, are causing volatile moves in between.

 

 

Going ahead, markets may maintain the prevailing recovery tone, with key support at 23,600-24,200 zone in Nifty and 77,800-79,850 zone in Sensex. On the higher side, we are eyeing 25,200-25,800 in Nifty and 83,000-85,000 zone in Sensex.

 

Participants should continue with 'buy on dips' approach and utilise intermediate dips to add quality names until the benchmark decisively breaks the support zone. Investors can focus on sectors/themes which are showing relatively higher strength during this recovery phase.

How is India placed within the emerging markets? Can it outperform peers? If not, why?

India is currently one of the best-placed emerging markets, supported by structural economic strengths, robust domestic demand, and a favourable investment climate. While it has outperformed its peers in recent years and is expected to continue doing so, in the medium to long term, short-term risks-such as market corrections, earnings volatility, and global headwinds can temporarily impact performance.

Given that recession fears in the US have eased, could Indian IT companies stand to benefit from a potential uptick in tech spending by US corporations? What segments within the IT space are likely to capitalise most - large-cap or the smaller peers?

With US recession fears easing due to cooling inflation and trade stabilisation, Indian IT companies are poised to benefit from a potential rebound in US corporate tech spending. Discretionary IT spending—especially on digital transformation, cloud migration and AI—are likely to resume, driving growth. Several Indian IT firms had strong deal wins in FY25, but revenue conversion was delayed. This pipeline may now begin to monetise.

 

Large-cap IT firms are best positioned to lead the recovery given their diversified exposure and execution strength. However, select mid-cap players with niche vertical focus may outperform if these sectors recover faster than expected.

Foreign Institutional Investors (FIIs) turned net buyers in the last month. Do you expect this trend to continue, or is there a risk they may start booking profits and repatriate capital? What are the key factors that will drive FII flows into Indian equities going forward?

The sustainability of FIIs staying net buyers remains uncertain. A key factor will be the trajectory of the US Dollar Index-continued softening would support further FII inflows, while a reversal could prompt profit-booking and capital repatriation. India remains attractive due to its strong macroeconomic fundamentals, including robust growth, improved fiscal and current account positions, and more reasonable valuations following recent corrections.

Are there any emerging thematic or sectoral trends in the Indian markets that you believe could deliver strong performance in FY26? Views on March 2025 quarter earnings?

We anticipate the Indian market will remain largely stock-specific rather than being led by broad thematic trends. However, recent earnings data indicate that sectors such as cement, affordable housing, and agricultural inputs are well-positioned for strong performance in FY26. The March 2025 quarter earnings have largely met expectations so far, signalling resilience across key sectors.

Concerns about stretched valuations in the small and mid-cap space have persisted. Do you believe those fears have now subsided, or is there still a potential bubble forming in this segment?

 

While recent market consolidation has provided some relief, valuation concerns in the certain small and mid-cap segments still remain. Many stocks in these categories had run up sharply, driven more by liquidity and sentiment than fundamentals. Despite the pullback, prices in several cases still appear disconnected from earnings growth potential, keeping risks elevated. Hence, caution is still warranted.