Mkt sentiment to remain positive in near-term: JPMorgan

However, sentiment is positive and will remain so especially after the FOMC minutes suggested that there could be some sequential monetary easing from the central banks including the Fed, Lewis said.

Lewis added that the current rally is driven more by sentiment than an improvement in the economic data so far. "The PMIs, globally and by region, have been weakening and all the leading indicators have moved down a little bit recently. So to that extent, it is policy driven and that’s been one of the unhealthy aspects for markets. Investors are continually looking for signs of the next policy move. This uncertainty of a policy actually contributes to market volatility, and that in fact, can have some negative effects on the economy," he warned.

Below is the edited transcript of Lewis' interview with CNBC-TV18.

Q: How are you reading the European markets? It appears to be on a high in anticipation of what the ECB might do. There are leaks in German and English newspapers. Would you think the Germans will allow them to buy bonds in the way in which it’s hinted in the newspapers?

A: The ECB and Mario Draghi have promised a more active and aggressive policy of purchasing bonds from the periphery economies provided those economies agree to a Memorandum of Understanding (MoU) and adhere to the fiscal targets.

So I think this is keeping expectations alive that once the European Stability Mechanism (ESM) is up and running in September, once it’s approved by the German Constitutional Court, the ECB will the open shop and will actually be a more active participant. So it could be a game changer for a while.

It could provide a breathing space and could encourage markets to take a more optimistic view of the problems in the eurozone, but of course, it doesn’t solve the problems of the lack of growth. Even if Germany still has a bit of residual strength and there are also these long run problems of how much fiscal integration can they agree to and share debt burdens.

These are still issues where there is a lot of uncertainty. But for now, sentiment is positive and I think it’s likely to remain so especially after the FOMC minutes suggested that there could be some sequential monetary easing from the central banks including the Fed.