If 2008 was the year that witnessed an unprecedented crisis of confidence, 2009 could be one of re-building confidence among market participants.

With inflation coming down, leading to lower interest rates, several blue chips are at multi-year lows and insurance companies are showing a marked shift from unit linked plans, the year is sure to throw up interesting long term investment opportunities for investors.

And gold, the asset class that truly transcends geo-political boundaries, could be the one to bet on heavily. Along with the southward movement of interest rates, debt has emerged as one of the top investment opportunities.

For retail investors, investing through debt mutual funds early in the year could turn profitable. “People in the higher tax bracket should invest through bond and income funds, and for at least 2-3 years,” said Gaurav Mashruwala, an independent financial planner. However, for those in the lower tax bracket, bank fixed deposits are usually the preferred investment option.

But, bank FD rates are also headed south and are expected to keep falling as long as banks keep reducing their lending interest rates. With the development of a robust corporate debt market on track, individual investors could expect to start participating in the debt market directly.

The linkages between the debt, spot and derivatives market for foreign currencies, and a market for interest rate derivatives are very strong. This should provide some liquidity to the corporate debt market, which might create opportunities for retail investors who do not want to go through the mutual fund route.

In 2008, investors lost money in shares. But 2009 could be the year of long-term investors with some large cap stocks now available at over 90% discount to their 2008 highs. These stocks have moved from the exclusive large-cap area, past the mid-cap range, are now resting in the small-cap segment.

Yet, market veterans expect stock prices to decline further from the current levels once corporate results start coming in from January second week. So the right time to invest for the long haul could well be after that.

“The good bets are those frontline companies from each sector that are India-centric,” said Arun Kejriwal, director, KRIS, an investment advisory company. Among those expected to give better returns are PSU, auto, FMCG, pharma, power and telecom companies.

“Once the cycle starts turning, banks will be off the block first. Capital goods and power companies would follow,” said Anup Bagchi, executive director with ICICI Securities. “And, with the government stimulus packages in place, infrastructure companies are expected to do well,” Bagchi added.

The life insurance segment is sure to witness a sea change during the new year. During the bull phase, insurance companies sold and buyers mostly bought ULIPs where returns are fully linked to the market.

But,in an uncertain market, these products are turning out to be patently bad ideas. Insurance buyers, having burnt their fingers in ULIPs, are now looking for capital protection and assured returns.