Dear Ramanasish,
You are attempting to do ab-initio molecular dynamics. At each step, the forces are calculated by performing a single point energy calculation of your system. If your CUTOFF is too small, the single point calculation leads to the wrong electron density, and hence your forces will also be wrong.
Choosing CUTOFF, you only need to make sure that your energy in a single point calculation is converged. To be completely clear: the latter of the two options you propose.
In general, look at the highest exponent of the basis you use. For example, if your system contains oxygen, and you use the double-zeta MOLOPT basis set:
O DZVP-MOLOPT-SR-GTH DZVP-MOLOPT-SR-GTH-q6
1
2 0 2 5 2 2 1
10.389228018317 0.126240722900 0.069215797900 -0.061302037200 -0.026862701100 0.029845227500
3.849621072005 0.139933704300 0.115634538900 -0.190087511700 -0.006283021000 0.060939733900
1.388401188741 -0.434348231700 -0.322839719400 -0.377726982800 -0.224839187800 0.732321580100
0.496955043655 -0.852791790900 -0.095944016600 -0.454266086000 0.380324658600 0.893564918400
0.162491615040 -0.242351537800 1.102830348700 -0.257388983000 1.054102919900 0.152954188700
The highest exponent is 10.389... in the first row of values, on the very left.
Now assuming this is the highest among all elements present, take this number and multiply it by 40. That should give you some idea of the appropriate value of CUTOFF, in this case CUTOFF = 400. Run a few ENERGY calculations with values, say, between 350 and 600, and check that the energy is, indeed, converged.
Yours sincerely,
Patrick Gono