Now is the time to buy bank stocks, according to Anthony Bolton, the stockpicking guru and former steward of the hugely successful Fidelity Special Situations Fund.

Banks were “near the end” of the liquidity crisis and historically the rights issues being announced now represented “a good point of entry” to the sector, he said.

Mr Bolton said that he was more optimistic than most about the outlook for bank shares, arguing: “For a medium-term investor, to buy a package of [bank shares] would be a good thing to do.”

However, Mr Bolton, who multiplied his investors' money more than a hundredfold while running Special Situations, was less confident about the overall share market, predicting that it would fall farther over the next 18 months.

“I don't think we've yet had a long enough or deep enough bear market by historic standards,” he told a Fidelity lunch yesterday. “I think we could see a low towards the end of this year or next year.”

Prefacing his remarks by saying that he did not hold a particularly strong view on the markets at present, he gave warning that the credit squeeze would take a long time to permeate the wider economy.

“We're in a period of two or three years of banks being much less prepared to lend, and that overhangs everything,” he said.

Yet companies with strong balance sheets in cyclical industries, such as housebuilding and retailing, could do well, he suggested.

Conversely, fashionable sectors, for example energy and mining, might disappoint.

When running Fidelity money, Mr Bolton was rarely a fan of banking shares because of the opacity of the businesses.

“It is so difficult to understand the dynamics of the underlying loan book, let alone the off-balance- sheet stuff,” he said. “I've been bitten too many times.”

Mr Bolton severed his last direct links with Special Situations in December but he continues to mentor Fidelity fund managers and has nearly finished writing a book on investment.

Times Recommends

• Darling under pressure on record public debt
• Mortgage lending falls 32% as drought deepens
• Oil prices firm after 10% drop to below $130