Rising oil prices, high interest rates and global risks are the key threats to stock market performance over the next 6-8 months, feel mostdomestic fund managers. The trigger for an upswing could be betterthan-expected corporate earnings growth and/or easy global liquidity.

An ET snap poll of 10 fund managers at domestic mutual funds and insurance companies revealed that nearly 70% of the fund managers expect benchmark indices Sensex and Nifty to be flat to lower over the next three months. At the same time, around a similar percentage of 10 fund managers expect the indices to be 10-15 % higher at the end of this calendar year.

On Wednesday, the Sensex rose 28.65 points to close at 17970.02, after touching a fresh 25-month high of 18047 intra-day .

A good thing is that the market finally appears to have stabilised; that should attract more investors as confidence returns, said A Balasubramanian, chief executive officer, Birla Sun Life Asset Management, adding, ... corporate profitability too has improved significantly, led by higher demand.

Brokerage house Motilal Oswal Securities expects all sectors to report growth in fourth quarter earnings, with the exception of telecom. This is partly due to a low base effect as most companies had reported a drop in earnings during the same period last year at the peak of the slowdown.

While most fund managers said the market was fairly priced, they do not see valuations as one of the risks. The Sensex is trading at roughly 17 times estimated earnings for FY11, which leaves little scope for a further rise in share prices, unless corporate earnings surprise analysts by a wide margin.

Earnings growth has to catch up with valuations if the market is to maintain its uptrend, says Navneet Munoth, chief investment officer, SBI Mutual Fund. He sees global risks as the main worry in the coming months.

Foreign institutional investors (FIIs) were heavy sellers at the start of the calendar. However , the trend reversed in February, and net inflows for 2010 so far has already touched $4 billion. On Wednesday , foreign funds net bought Rs 338 crore of shares.

More than anything, easy liquidity could be one of the major triggers for the market to rise further, said Madhusudhan Kela, head equities, Reliance Mutual Fund.

Steadily rising commodity prices and the spectre of higher interest rates is leading many to believe that a correction could be underway before the market starts consolidating for the next rise.

Spike in commodity prices like oil, coal and iron ore prices among others are a matter of concern, said Sashi Krishnan, chief investment officer, Bajaj Allianz.

This is likely to cause margin pressure for companies. Also, if the inflation continues to rise, there may be some policy response that can surprise the markets, he said.

Last month, the Reserve Bank of India (RBI) had raised both signalling interest rates by 25 basis points each. The central bank will meeting on April 20 to review interest rates, with most analysts expecting a further tightening.