India a stock picker's market: JPMorgan Sec

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Global markets have been in a tizzy for the last few days on weak cues. Yesterday, the Dow closed below the psychological 10,000 level for the first time since November 4 on worries about debt problems in Greece, Portugal, and Spain. However, Asia does not seem to have picked up this negative sentiment with most indices trading in the green. In the backdrop of this uncertainty, where are global markets headed?

Sunil Garg, MD, Head-Asia Banks and Financial Services, JPMorgan Securities, says the biggest uncertainty relates to Europe. He says the correction in global markets started with the fear of monetary tightening. Both the Chinese and Indian banks have hiked rates over the last few days and indicated an exit from stimulus. One could see some more uncertainty over the short-term, he added.

On how Asian markets will pan out going forward, Garg says the situation is closely linked to monetary tightening. He feels inflation has returned faster in Asia.

Garg is overweight on India and sees it as a stock picker's market. He feels interest rates are likely to go higher in India. "The Reserve Bank is likely to tighten its monetary policy." Credit growth and quality would be the key drivers going forward, he stated.

Here is a verbatim transcript of the exclusive interview with Sunil Garg on CNBC-TV18. Also watch the accompanying video.

Q: First let me ask you about this whole European scare, which cropped up last week. How big an issue is it in your eyes?

A: The biggest uncertainty, if you like, relates to Europe. That is really an issue and the markets got itself into a big frenzy about slightly larger sovereign risks such as the UK as well, apart from the obvious ones that are being talked about which started with Greece.

Now, if you look at it specifically from an Asian perspective, I don't think there is an issue directly. The big risk that we run is twofold one - there is a general risk aversion and the other is that as a sovereign debt crisis threatens then could a central bank or a government tighten fiscal and monetary policy aggressively, particularly fiscal policy and engineer it further sort of double dip which has been a fear if that becomes a reality. So to that extent there is a uncertainty associated with that which clearly leads to I think the volatility that we are seeing.