Buying The Dip Via Mutual Funds
Every investor, naive or advanced, keeps scouting the undervalued assets in expectations of beating the average return of any particular assets. Notably, such opportunities occur during the time of market corrections due to some macro factors.
The common narratives like ‘buy the dip,’ ‘sell when everyone buys, buy when everyone sells,’ ‘panic selling,’ and so on are not unheard of. However, every asset has its own cycle and it is hard to predict their bull and bear phases. Let’s take gold for example, the yellow metal which touched its low of Rs 67,450 per 10 grams in June 2024, currently trades above Rs 86,000 per 10 grams in February 2025. Gold, also known as ‘safe haven’ rose Rs 8,356 per 10 grams in the initial six weeks of 2025.
The smart investors, who had bought gold during its correction, harvested the gains later on. Whenever, a reliable asset class goes through its phase of correction, brings the opportunity disguised as adversity.
Such phases of downward rally also occur in the stock market, where the prices of stocks continue to fall despite the good fundamental and robust strength of the companies.
What is Correction?
This is a commonly used term in the market ecosystem where prices continue to fall more and rise less, further the prices also stay stagnant where the increase and decrease of price happen frequently but does not result in any significant gain or loss.
Currently, the Indian stock market is also experiencing the same phase of correction due to several domestic and global factors jittering and spooking investors. The Nifty 50 index which is a basket of top 50 Indian companies with highest market cap has declined more than 12% from its top. Usually, when the benchmark index falls significantly, the individual stocks fall more, while mid and small cap stocks experience bloodbath.
What Causes Correction?
Market corrections are hard to predict, especially if you are not a professional in this domain, hence you can only observe the correction in hindsight. The corrections can happen due to various domestic and global factors such as geopolitical tensions, GDP slowdown, recession etc.
Let’s understand why the Indian equity market is going through a sharp correction. The Nifty 50 index has generated negligible returns in the past 7 months accounting from February 2025 due to several factors such as slowdown in domestic consumption, high interest rate, foreign capital consecutive outflows, Trump’s retaliating tariff plans, weak INR and a streak of disappointing corporate earrings. Such factors cumulatively affect the market sentiments and wreak havoc on the gains.
When to Buy Dip And How To Avail Correction?
You need to take note of this, 2-3% fall in the market does not mean correction and you should not feel FOMO to capture it, instead continue with your normal SIPs. But, when the market reflects a significant fall in hindsight, you should have your extra funds ready.
As mentioned above in this blog, buying the dip surely makes money in the ‘long-run.’
However, taking the route of directly investing in the stocks can make you stuck with that correction for years and in fact the long-term investing can result in loss instead of wealth building.
If investing in small and mid cap stocks lure you to capture exponential returns in the long run, the sea of thousands of companies will leave you with decision paralysis. To simplify your investing journey, the route to invest through mutual funds sounds a smarter decision.
During the correction phase, the NAV of mutual funds also becomes cheaper. Don’t worry NAV is just another jargon but it is important to understand what it is. NAV refers to net asset value which is the value of total units of the fund divided by the size of fund. Suppose the size of the fund is Rs 1 lakh and the units issued are 1,000, then the NAV is 100.
Now let’s understand how this NAV becomes cheaper during the market downturn. The mutual funds also consist of various stocks in different proportions, the correction in those stocks lead to fall in the NAV and you buy it cheaper.
There are different sets of mutual funds such as multi cap, flexi cap, small cap, large cap, mid cap, hybrid etc., hence what type of mutual funds to buy in a particular market condition also requires a smart approach. MINTIT can certainly help you strategise this goal with the opinion of experienced professionals. MINTIT provides tailored solutions to achieve your financial milestones.
MINTIT’s tailored investing plans can help you to choose the right mutual funds for you to achieve your financial milestones. Buying the dip and availing the dip are two different ends of smart investing and make sure you avail the opportunity with a smart approach.