Theoretically, with a thriving derivatives market in place, investors should be able to benefit from stock prices falling much as they do from a rise. If you knew for certain that the market is going to keep slipping from here, you can pocket a tidy sum selling index futures, buying put options or simply short-selling stocks (selling stocks you don't own and buying them at a lower price).

However, in reality all of these strategies are extremely risky. That is because you can profit from them only if markets head steadily down and you can anticipate this in advance.

In reality, though, stocks in a bear market don't drift down in a gentle and orderly fashion like a feather in the breeze. Instead, bear markets are often punctuated by brief but sharp stock price rallies. Even the bear market of 2008-09, the most vicious one in recent history, saw as many as three separate rallies which took the BSE-500 up by over 20 per cent each time and lasted for a span of 2-4 months.

That is not counting the whole new bull market that flagged off, when everyone least expected it, in March 2009. As short positions usually entail leveraged bets on market direction, they can do big damage to investor wealth if they backfire. Betting on market direction is particularly perilous in the Indian market, where whimsical FII flows, rather than domestic fundamentals, dictate prices.

Nor can you use fundamentals to predict the markets. Experience from 2008-09 clearly proves that stock prices move up or down ahead of profit changes for India Inc. The market crash of 2008 preceded the earnings slowdown for companies and the markets took off before corporate profits charted a recovery.

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