What is Bhaskar’s bet on a visible slowdown in the economy?

"In the past, SBI PLR (prime lending rate) crossing 13.25% has usually been an indicator of an impending slowdown. (It has already crossed that mark) When car loan rates hit 15% (they are 12-13% right now), a slowdown follows soon enough. So the signals are mixed, but the signs are there," he says.

And if there is a systemic problem, stock selection offers little protection from a downtrend, cautions Bhaskar.

The other problem for fund managers is that there is hardly a sector immune to a downtrend because of the run up in valuations.

"There are no defensive plays available at reasonable valuations. Most of the recent best performing sectors like auto, IT and FMCG were laggards during the 2007-08 Bull Run. But today, they are either fully priced, and in some cases, over priced. That makes them as vulnerable to a sell-off like the growth stocks," says Bhaskar.

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"If one were to take a three year view, I would say the best bets today are capital goods and infrastructure stocks. While high interest rates could hurt these sectors for a while, the valuations are attractive enough for the stocks to be able to deliver decent returns over three years," he says.

Market experts were expecting a deluge of earnings downgrades in the current season. Fourth quarter numbers of quite a few companies—including heavyweights like Infosys Technologies and Reliance Industries—have fallen short of analyst estimates. And while there have been scattered instances of earnings estimates being slashed, the downgrades have not been alarming, at least for now.

But Bhaskar feels there could a steady rise in the number of earnings downgrades over the next couple of quarters.

"We could see more earnings downgrades in the coming days. Initially, the consensus was that FY12 earnings would grow 25%. That has now been lowered to 18%. It is when that number further drops to 13-14% that the market could bottom out," says Bhaskar.

He says that the market does not need a huge oil spike to damage corporate earnings.

"Crude staying at current level can be bad enough. If oil is steady around $120 (a barrel), it means commodity prices are unlikely to see any meaningful decline. Add to that high interest rates and corporate margins for the third and fourth quarter could be under severe pressure," Bhaskar says.