investors can mitigate risks by sticking with quality companies that have withstood volatility in the past absence of a clear revival in corporate earnings remains the biggest medium term risk for the indian market ajay bodke tells et wealth amid the equity market touching new highs what approach should investors take investors need to exercise caution in the current market as it has been zooming up due to the torrent of liquidity they can mitigate risk by choosing welldiversified portfolios of high quality companies that have previously withstood volatile markets risky momentum based plays need to be avoided especially if they arent supported by strong earnings growth the market is expensive will inflows from foreign institutional investors continue the outlook for global equities remains positive with global growth picking up and inflation remaining below targets with the us administration committed to push through tax cuts and infra spending we expect some reversal of flows to the us from other developed and emerging markets however india continuous to be among the fastest growing large emerging markets and we expect a revival in earnings over the next six months once the aftereffects of the gst rollout play out ensuring that flows to india remain strong due to the strong improvement in the ease of doing business and massive opportunities across sectors india has emerged a favoured destination for foreign direct investments too what risks do you foresee in the near term for the indian market we have already discounted for an increase in the us fed rate in december 2017 domestically a rate cut looks increasingly unlikely in the short term rising commodity prices especially crude oil need to be watched closely any significant flareup can lead to an increased import bill and put pressure on corporate margins will earnings revive by end201718 absence of robust revival in earnings remains the single biggest risk for the market in the mediumterm with private sector capex unlikely to takeoff in the next 12 quarters the government is trying hard to revive aggregate demand through large capex in sectors like roads power transmission railways etc but any large fiscal stimulus will be perceived negatively by a section of the market a fullfledged revival in earnings is likely to happen from 201819 do you recommend psu bank stocks after the governments recapitalisation plan unless the government unveils a timebound roadmap for such structural reforms psu banks can never form a part of ones core portfolio though one could have bought them from a shortterm trading perspective due to low valuations and underownership between growth and value stocks what do you prefer we employ a combination of growth and value philosophies depending on the market conditions and valuations in an environment of ample liquidity gentle interest rate outlook and robust demand the accent is more on growth to leverage fastpaced earnings trajectory in a market with higher valuation multiples conversely weak growth trends and heightened risk outlook on economic or geopolitical frontwe are in such situation now