He said FII investment in domestic stock market is as high as USD 23 billion and even a small pull back on account of tax cut in the US would have implications on the markets here. 

"I would see broadly 2018 would be an year of managing uncertainty and volatility. Uncertainty on account of exogenous events and uncertainty on account of endogenous events," he said here at Yes Bank's Annual Economic Conclave.
The first and foremost exogenous uncertainty, he said, is the change in the US economic management.
Observing that America has cut corporate tax rate from 30 per cent to 21 per cent, Singh said it would increase profitability of the big US firms and overseas investors may pull back from emerging economies particularly from India.
"The total FII investment in Indian stock market is as high as USD 23 billion and if a small significant part of it gets pulled back, on account of much significantly lower rate of corporate tax in the US, then you will have its consequences and the ripple effects in Indian stock markets which you have already begun to see," he added.
The other exogenous factor would be subdued exports, though it has started to pick up, and uncertainty of oil prices, which would have a bearing on current account deficit.
As regards the endogenous factors, the chairman said these include inflationary pressure because of hike in minimum support price, impact of oil prices and slippage in fiscal deficit.
Referring to fiscal deficit, he said the slippage was on account of structural reforms, especially implementation of the Goods and Services Tax.
He, however, underlined the need for setting up of an independent fiscal council, which is in operation in about 44 countries.
Singh did exude confidence that the government will manage uncertainties in a year of volatility as India is on the "path of overall macro economic stability and the principal contours of economic development".
"We are on much happier road than sometime ago and there are therefore reasons to be optimistic," he added.
Speaking at the event, NITI Aayog CEO Amitabh Kant said to push economic growth, there is a need to focus on transforming at least seven states and 150 districts.
Kant said more reforms are required in areas including mining, petroleum and natural gas and construction.
"Our personal belief is that beyond fiscal and monetary policy, we need to look at gross capital formation in Indian economy, which has come down. Let's be honest about it. It has come (down) from 36 per cent to 26 per cent and we need to take it back to 36 per cent," he added.