So far, the Nifty has shown itself to be in some kind of a correction. After a 1000 point rally, the Index was likely to correct, our question was: when will it correct? Therefore, the current dip should not come as a surprise. The sharp decline is certainly unusual, but then markets will not oblige us all the time.
When will this analysis go wrong? First, when the Nifty closes lower than 5937 and then remains below this support, consistently. Once we realize that the market has not held on to 5937 support, we should assume that a deeper correction lies ahead. The next zone of support is the 5200 - 5400 consolidaiton which lasted for four months in mid 2010.
Assuming that 5937 does hold, what lies ahead? I assume that we will see a period of consolidation. We should remember that the months of December and Janaury are usually up, so the seasonal factor favors the bulls.
Why worry? The only cause for worry comes when traders are over-leveraged. You should worry about the ill effects of leverage even in normal times. Keep your exposure to a sleeping level, and you will find that up or down, you will enjoy being part of the market.
Finally, one reason for this exaggerated decline may well be TV. I think the channel begins to highlight the declines as if it is the end of the world. As we know, it is just a dip. Nothing much.