Stock Market Strategy: Should investors buy the dip or turn to gold amid market correction?

The Indian stock market has been witnessing a sharp correction, with benchmark indices Sensex and Nifty 50 declining by 2.4% each so far this year. This downturn has been largely driven by persistent selling by Foreign Portfolio Investors (FPIs), who have pulled out over ₹88,100 crore from the domestic stock market since the start of 2025.

Other key factors weighing on stock market sentiment include the looming threat of a global trade war, rising US Treasury yields, a strengthening US dollar, a weakening rupee, disappointing corporate earnings, and weak domestic economic growth.

Amid this uncertainty, gold prices have surged around 11% year-to-date (YTD), outperforming equities and attracting investors seeking a safe haven.

With markets under pressure, investors are left wondering: should they increase exposure to gold for stability, or take advantage of market dips to buy equities at lower valuations? Here’s what analysts suggest.

Balanced Approach: Stability with Gold, Growth with Equities

Om Ghawalkar, Market Analyst at Share.Market, highlights the importance of diversification. He advises investors to maintain a balanced portfolio, combining gold for safety and high-quality large-cap equities for long-term growth.

“The markets have been highly volatile, with many stocks hitting their 52-week lows. Amid this turbulence, gold has once again proven to be a reliable safe haven, offering stability during periods of economic uncertainty and market downturns,” he said.

According to him, the exact allocation depends on an investor’s risk appetite and investment horizon, making it essential to tailor strategies to individual financial goals.

“Market weakness often presents unique investment opportunities. While gold provides safety during uncertain times, equities remain the cornerstone of wealth creation over the long term. A diversified approach — combining the stability of gold with the growth potential of equities — can help investors achieve both financial stability and sustainable growth, even amidst market fluctuations,” Ghawalkar said.

Rebalancing Strategy: 60% Equities, 30% Gold, 10% Cash

Sumit Chanda, CEO & Founder of Jarvis Invest, expects the Indian stock market to recover soon, especially with the Reserve Bank of India (RBI) lowering interest rates.

“With the Central Bank lowering interest rates, equities are likely to recover, which is a positive sign for long-term investors. Lower borrowing costs often boost businesses and market confidence, making stocks an attractive option. However, it’s wise to maintain a balanced approach to navigate any short-term volatility,” Chanda said.

He suggests a portfolio allocation strategy of 60% equities, 30% gold, and 10% cash. Gold can act as a hedge against uncertainty, while cash reserves allow investors to take advantage of market dips.

“As the market shows clear signs of recovery and strength, investors can gradually increase their equity exposure to 70-80% to maximize potential growth. This approach ensures a steady and flexible strategy—one that protects against risks while allowing investors to benefit from a market rebound,” he added.

Continue SIPs, Avoid Panic Selling

Swapnil Aggarwal, Director at VSRK Capital, emphasizes the importance of discipline in investing and warns against stopping or pausing SIPs (Systematic Investment Plans) during market downturns.

“The market generally brings in such downturns, and long-term investors who accumulate positions during volatile phases will be rewarded. Fear selling mostly leads to locking in losses. Those who stay invested benefit when the market turns in their favor,” Aggarwal said.

Agarwal acknowledged gold’s role as a hedge against economic uncertainty and geopolitical risks but notes that equities historically provide better long-term returns. He suggests that investors can consider part allocation to gold ETFs if they are looking for their portfolio to be part stable over into gold.

He advises, “A rational strategy could involve buying high-quality equities on dips while having a moderate position in gold as a safe haven. Diversification remains key — spreading investments across equities, gold, and other asset classes helps manage risk and enhances long-term returns.”

Bottom Line: Diversification is Key

While the stock market correction has shaken investor confidence, analysts recommend a diversified approach rather than making impulsive decisions. Gold provides stability in uncertain times, but equities remain crucial for long-term wealth creation, according to analysts. Maintaining a balanced asset allocation, continuing SIPs, and taking advantage of market dips can help investors navigate volatility effectively, analysts added.

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.