Will emerging markets become a euro zone-style risk?

Are emerging markets the new euro zone?

Emerging markets have been a key source of volatility for global financial markets in recent weeks, raising the question of whether they will become a "euro zone" for investors this year.

"We expect that woes in emerging markets may continue to provide occasional worries for global markets similar to what was experienced during periods of the euro zone crisis in 2011 and 2012," William Stone, chief investment strategist at PNC Wealth Management wrote in a report titled "Emerging Markets are the New Eurozone" last week.

(Read more: Will China be the'savior' of emerging markets?)

"Our expectation is that emerging markets will also fail to drag the global economy into crisis. (But) investors should position themselves to be able to withstand any volatility from the concerns, since investors forced out of stocks during the euro zone crisis paid a heavy price in terms of missed market returns as the worries passed," he said.

Mitul Kotecha, head of global currency research, Credit Agricole says while there are vast differences in the nature of the euro zone debt debacle and current emerging market troubles, the underlying similarity is the potential of contagion – from emerging markets to developed markets in this case.

Cristian Baitg | E+ | Getty Images

"There's certainly potential for contagion. While there's differentiation, there are so many different issues for emerging markets that cumulatively, they are adding to negative sentiment when we have Fed (Federal Reserve) tapering," he told CNBC.

There has been some evidence of this contagion reflected in the performance of emerging market and U.S. equities this year. The benchmark has fallen about 3 percent since January 1, while the MSCI Emerging Markets index is down 6.5 percent.

(Read more: How fragile are emerging markets?)

The selloff in emerging markets has been triggered by a combination of factors from the U.S. Federal Reserve's pullback in its bond buying program – which has provided global markets with ample liquidity in recent years – to concerns over the growth outlook for China. The "Fragile Five" – India, Indonesia, Brazil, Turkey and South Africa – markets have been among the worst hit given their vulnerabilities including twin fiscal and current-account deficits, falling growth rates and above-target inflation.

Is the worst over for emerging markets?

According to Kotecha, the emerging market turmoil is unlikely to transpire into a multi-year episode given they are in a better position to weather the storm.

"Fundamentals are better than in past crises. For example, when you look at FX reserves they are a lot more solid than in the past," he said.

(Read more: Why Fed volatility is emerging markets' 'poison')

Rajiv Biswas, chief economist, Asia-Pacific at IHS Global Insight agrees contagion from the emerging market troubles will be on a far lesser scale than the euro zone debt crisis.

"Euro zone contagion was driven by the toxic assets on U.S. and European bank balance sheets related to subprime securities, which translated into a systemic EU banking system crisis and deep contraction in bank credit," Biswas said.

"At present, the macroeconomic problems of different emerging markets do vary considerably. The most fragile emerging markets are more vulnerable to capital flight and currency depreciation, while other emerging markets which have sound macroeconomic policies, low levels of government debt, and well capitalized banking systems are less vulnerable," he added.

—By CNBC's Ansuya Harjani. Follow her on Twitter:@Ansuya_H