Honestly, I doubt if the question was framed properly.
Also, this statement:
In short, as far as possible, we should avoid making use of stateful session beans. why is it so?
Maybe the answer was expected to be in the lines of a school of thought "stateful session beans do not scale as well as stateless", which I personally feel is just an off-the-cuff remark. Also, was the question asked without a context?
Where you need to store the context is entirely dependent on key parameters such as granularity of the transaction.
-Siplin