Investors cautiously optimistic; Budget 2018 should focus on fiscal deficit: HSBC Global AMC

Although in the past higher inflation hasn't been too damaging to equity markets -- higher inflation and higher interest rates than expected could be a cause of concern. Otherwise, most of the elements are in place for global markets, in terms of GDP growth etc.

US market is expected to grow well this year as well and the EU has started to bring in growth since last year and will continue to so, said Pradhan. Moreover, emerging markets (EMs) too have joined the party in terms of growth, said Pradhan.

Therefore, on one hand there is nothing to worry about growth, on the other hand the only worry is miscalculating the timing and quantum of interest rate hikes, and if inflation comes back.

Pradhan said, for India per se, crude inflation is a threat because for the last few years our fiscal has carried the benefits of lower crude prices. It is unlikely that the crude will remain at elevated levels going forward on back of higher supply, said Pradhan.

However, domestic inflation is a bigger worry for India in terms of food prices etc., but the hope is that inflation remains in the range decided by RBI.

From the Budget 2018, he said the expectation is that government will focus on fiscal deficit, revenue enhancement.