An interesting trendline of the Nifty. (I had used the daily closing price of the Nifty over the past 20 years on a log chart.)

http://img707.imageshack.us/img707/8025/bakedchart3.png

What do you think will happen if the trendline is broken?

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Long term trendlines are usually very powerful. I see the following three possibilities which I believe are in decreasing order of probability.

1) The trendline is respected and a new medium term uptrend begins.

2) The trendline is broken and we enter into a period of sideways consolidation for many years.

3) The trendline is broken and we revisit 2008/09 lows.

We can't just look at the technical aspect in isolation, we need the fundamentals to confirm them. So, lets look at the slope of the graph. Observing the slope of the line I drew, we can see that that slope translates to approximately 19.5% returns of the Nifty compounded each year. Obviously the fundamentals, as of now, can't provide such growth. (The fundamentals demand the slope to be somewhat flatter.) So we would most likely see a period of sideways consolidation but when and for how long, it would be anyone's guess.

The Nifty is getting dangerously close to its multi-year strong support line at around 4800-5000.

http://img528.imageshack.us/img528/3412/bakedchart.png

I hope it doesn't break the line but if it does I reckon things could turn a bit ugly.
I would then suspect the Nifty would enter a period of sideways consolidation for some years. (Something in lines of the 10 years consolidation between 1994-2003 testing the 800 odd support line every couple of years or so for 10 years.)

Like what Prashant Jain of HDFC MF said, investors should be happy to get a chance to accumulate larger units through SIPs over a prolonged period.

When the recovery happens in future, they get rewarded for their patience in one go. We all know what followed the 1994-2003 consolidation, the 2003-2007 bull run was as fierce as one can get.

So continuing investing will be the most practical strategy, for people investing for their retirement corpus, with 10-15 years horizon, the more the fall the merrier.

In my opinion. investing through SIP is only for three kinds of people.

1) Those who are ignorant about the markets and are undisciplined or they don't have the time to track the market.
2) Those who believe in some (be it weak/semi-strong or strong) form of efficient market hypothesis.
3) Those who believe in the RWH (Random walk hypothesis).

For those who believe FA/TA gives an edge would (and should) apply those principles and attempt to at least partially time the market. No great investor/trader has ever been successful because they used SIPs. That being said, ironically, retail investors are better off using SIP's because they usually don't have the discipline to follow their own rules.

I hardly know of any great investor who advocated timing the market.

SIP is just a method. An investor following strong FA and bound by capital can still decide to invest in his selected stocks over a period of time. This SIP purchase of shares is now supported by most brokerage houses.

The basic advantage of SIP is it helps people to keep investing in uncertain/nervous times.