Emerging mkts like India will struggle ahead: IG Markets

Though the US' first quarter has been surprising, Justin Harper of IG Markets is doubtful of it continuing on the correct path in the second quarter with housing and jobs still weak. He feels there will be more pressure on emerging markets given what we are seeing the global economy newsflow.

Earlier the mood was to take on risky assets whether it is currencies or equity plays within India or Southeast Asia but now there is a shift. He feels that emerging markets like India will continue to struggle.

Below is an edited transcript. Watch the accompanying video for more.

Q: The US markets are now just one session short of having the best quarter since 1998. How does the going look for them considering that the economic data has been on the better side lately?

A: I think it has been a surprising Q1 that no one expected. There have been lots of driving forces that were seen with the US economy strengthening, the euro zone easing of tensions there and also the fact that the sentiment seems to be a lot better. So those have been the catalysts along with the Fed and central banks easing their monetary policy for the first quarter of the year.

Looking ahead to Q2, can this strong rally continue and those catalysts that we saw at the start of the year is starting to look little bit tied at the moment there. So the euro zone tension is still there, the US economy has been showing a few cracks here and there with housing and jobs data not being as strong as people would like. So we might not see it right as high as we did in the first quarter.

Q2: The irony for markets like India is that we have moved in a dramatically opposite direction. In the past five-six weeks it has just been lower lows for markets like India. How are you positioned on an emerging market like ours? Do you think we could see some more pressure or do you think that we have formed a base now?

A: I think certainly we could see some more pressure on emerging markets given what we are seeing with the global economy. There is just shift of mood there where people were getting more bullish and were looking at taking more risky assets whether it is with currencies or equity plays within India or Southeast Asia.

With the global economic struggling at the moment, it will crossover to emerging markets and we could see some more dampening of sentiment towards markets and you look at India which has come off quite a bit. Interestingly Reuters has come out and said that the Indian stock market is going to rise 26% this year which is pretty bullish call given the market is down quite a few percent since the Budget.

So it is hard to know where the optimism is coming from at the moment but I think emerging market should probably struggle looking at the bigger picture.