Sure, it is a good time to buy for lucky investors who are just starting in on equities. What if I've already sunk a big portion of my savings into equities in the last three years and my portfolio is drenched in red?

First thing, don't behave ostrich-like and stop looking at your portfolio. Now may be the time to effect the repairs that are crucial to make sure that your portfolio gains when the next rebound happens.

A study of the three different boom-bust cycles in the Indian market in the last 15 years shows that new sectors and stocks lead the charge in every new bull market. Media, telecom and software, the top performers of the 1999-2000 bull run were nowhere in the picture in 2001-04. Power, banks and realty - the leaders of the 2007-08 rally - were nowhere in the picture in the 2009-10 bull run.

Thorough overhaul

If you want your portfolio to participate in the next bull market, it will need a thorough overhaul on the following lines.

Take profits in sectors and stocks that featured big gains in the last two years — FMCGs, mid- and small-cap consumer plays.

Bite the bullet and sell stocks of companies that have seen their earnings hit by galloping interest costs. Those that have looming FCCB redemptions should also go. The lag effect of interest rates may impact their prospects for a few quarters.

Switch from high PE to low PE stocks while avoiding the above risks. Not sure how to do that? Buy into index exchange traded funds, value funds or diversified mutual funds with a good record. That will ensure participation in any rebound.

Don't jump in with all your surpluses in at one go. Divide the surplus into three portions and invest one part now and at every 5 per cent dip in the markets.

Finally, whether it's a bullish market or a bearish one, it is best to allocate a fixed proportion of your portfolio to equities and balance it with safer investments. If your equity exposure is already at the 60 or 70 per cent mark , it is advisable not to go overboard on buying more stocks.

Gold and debt

Instead, you could look at two investment avenues that will work extremely well if the bear market stretches on. One is gold, which has corrected over 15 per cent in the last month and offers a decent opportunity to buy. Take gold exposures through exchange traded funds.

The second option, of course, is fixed deposits. With interest rates climbing 3 percentage points or more in the past 18 months, this is the time to lock into double-digit interest rates on fixed deposits.

The window of opportunity may not last. Given the fluid credit scenario, it is best to stick with the safest options — bank deposits offering 10 per cent plus rates and deposits with top rated companies and NBFCs such as Sundaram Finance.

That provides plenty of answers to the question we began with. So what if we're in a bear market?

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