Happy days are here again.With the markets bidding adieu to Vikram Samvat 2065 in style, offering best-ever returns since 1991, investors can look forward to more bullish times in Samvat 2066 as well, say experts.

The Sensex should trade at its all-time high by next Diwali. Fundamentals of companies have improved and we are talking about a 23-25 per cent growth in earnings for financial year 2011.

There may be a correction on the way, which will be a healthy one and will be limited to about 15 per cent," Angel Broking managing director Dinesh Thakkar said.

One reason why investor sentiment is buoyant is the comfortable cash position in the system following the stimulus packages across the globe to combat the worst-ever recession since the Great Depression. With experts sounding optimistic, investors have every reason to rejoice.

Since last Diwali, the BSE Sensex has gained 92.33 per cent, bouncing back sharply from a loss of 58.17 per cent in the comparable period of the previous year. Incidentally, the return in the previous year reflected the worst-ever Diwali performance since 1995.

During the past year, Jindal Steel, JSW Holdings, IVRCL Infrastructure, Hindustan Oil Exploration were the top performing stocks in the BSE 500 index with returns ranging from over 400 to 600 per cent, comfortably outperforming the Sensex.

Most experts FC Invest spoke to are bullish about the market and see limited downside potential. They i advise investors to put money in a c phased manner and take advantage f of market corrections. ( "After 20 months of prolonged s downturn triggered by the global crisis, we have entered a secular bull phase. As global recovery gets more and more sustainable, risk appetite a for emerging markets will improve a further. Money will eventually chase growth, and India with its expansion- t ary fiscal policy will be able to sustain growth at a high single-digit level, which will ensure global liquidity flow e into India," Mirae Asset s Management chief executive officer Arindam Ghosh said. i FIIs pumped in Rs 64,535 crore " into the equity market up to October i 15 this year. They crossed the $13 bil- i lion mark on Thursday, according to t data from the Securities and a Exchange Board of India (Sebi).

"As regards the outlook till next i Diwali, we think the market will be at higher levels. One key reason for this is the improved fundamentals of companies and sustained fund flows from foreign institutional investors (FIIs) and domestic institutions," said D D Sharma, senior vice president (research) at Anand Rathi Financial Services.

"We see limited downside now, and if a correction happens, it will be a healthy one. If the market goes down, it will be because of global factors," said Nipun Mehta, executive director and head of India at SG Private Banking. The wealth manager is bullish on capital goods, infrastructure and banking.

Expert views vary on whether interest rates might harden next year.

"We expect CPI (consumer price index) and WPI (wholesale price index) to converge by March. Hence, the Reserve Bank of India may act ahead of the curve. It is, therefore, possible that we may see a turn in the interest cycle by early next year," Ghosh said. Mehta, however, felt for that to happen, credit offtake needs to improve, which will happen in the next few quarters.

Expecting interest rates to remain at the same level, Thakkar said while deposits have grown 20 per cent, credit growth was only 14 per cent.

So, there is ample liquidity in the system and there is no reason for the RBI to raise rates, he said. Even if there is a rate increase, it will take at least three years for its real impact to be felt, he added.

Most experts say long-term investors will do well to stay put. "Stay invested in quality stocks for the long term, if you are an investor. If you are a trader, keep positions light, keep booking profit faster and keep tight stop-losses," Sharma said.

Favouring phased investment, Thakkar said since no one has got the entry point right so far, it's impossible to predict the correct entry level. One should invest in a phased manner with a two-year time horizon to draw the best advantage of price averaging.

RL Narayanan, vice-president of institutional sales at Bonanza, advised retail investors to look beyond the index and invest into stocks systematically on a monthly basis. Market tracking firm Anand Rathi recommends Allied Digital, Biocon, Bilcare, Bhel, HDIL, ICICI Bank, IDFC, ITC, JP Associates and Mundra Port, and favours sectors such as banking, engineering and construction, generic pharma players and automobiles.

Angel Broking's top picks for Samvat 2066 are RIL, Axis Bank and Reliance Infrastructure. These stocks returned 102.04 per cent, 87.17 per cent and 221.93 per cent, respectively, in Samvat 2065, the broking house said. Striking an optimistic note, Narayanan said the present trend in the market was bullish, thanks to strong liquidity. The market will remain bullish in the short term and Nifty will consolidate at 4,000 level before going up further, he added.

Bonanza's top picks are in power and oil and gas sectors, which include NTPC, Torrent Power, Cairn Energy and ONGC. Suhas Samant, fund manager at Sharekhan, preferred mid-cap stocks to large-caps.

"Large-cap stocks appear stretched and will continue to be so because FIIs will continue to put money into Indian equities," he said.

Sharekhan favours mid-cap pharma and IT stocks. Stride Acroblab, Allied Digital and 3i Infotech are its top picks. The mid-cap index returned 127.26 per cent in Samvat 2065. Emerging market stock funds attracted net inflows of $4.8 billion between July and September, data from fund tracker EPFR Global shows. Mirae said it prefers financials, consumer discretionary, auto ancillaries, energy and IT sector.