Capture OnChange of Dynamic Dropdown

We have to populate a string field based on the value selected in another field, which is a dynamic dropdown field. Is there some OOTB way to achieve this in Hippo doctypes?

Maybe or no. It depends on how dynamic you want it, but it all still requires some work on your part. If it needs to react to your selection right away, then there is no ootb way. You would have to write your own ui classes for that. This can be done (they are configured in namespaces/namespace/document/editor:templates), but this also places a maintenance burden on your project. As well as any issues with upgrades.

If it can be done later then you could use a derived data function or respond to a workflow event.