Indian markets are likely to see a further downside, driven by global factors like the hardening of bond yields in the US. But this would be a perfect opportunity to buy Indian equities, said R Venkataraman, MD, IIFL Group. With global demand and urban consumer sentiment improving, it is safer to have exposure in global sectors such as IT and metals, he told Rajesh Mascarenhas on the sidelines of IIFL Enterprising India Global Investors’ Conference ‘Rise of the Millennials’. Edited excerpts:Many affluent investors are cautious on the markets currently. Do you expect more downside?Yes, we expect further marginal downside driven by global factors like bond yield hardening in the US. This might cause some fund outflow from India. Downside will be a good opportunity to buy into Indian equities. Indian equity market will do very well over the next three years. Macroeconomic conditions are improving; December 2017 earnings have been decent. We expect Indian equities to do well in the medium to long run.Given the current macros, are we comfortable on fiscal deficit and other parameters?Yes. Current account deficit is doing well. With regards to fiscal deficit, since we had to invest in growth, fiscal deficit has widened a bit. But I would say it is not of a concerning magnitude. Also, in India, we had twin adjustments — GST and demonetisation — in the recent past. Considering that, we are doing reasonably fine.December quarter results have been better than expected. How will earnings be going ahead? Also, your views on Indian equities.Yes. Earnings momentum is expected to pick up. Banking sector is going through an adjustment, especially corporate banks and PSU banks. We expect NCLT to resolve many sectoral issues, especially in metals sector. Of the total ?1.3 lakh crore IBC cases under NCLT, nearly ?0.6 lakh crore are related to steel sector. With the recent progress on some cases we expect strong pullback in production in the metal sector. The signs are positive.Which are the sectors to lead recovery in the coming quarters?Considering the current state of volatility where global demand and urban consumer sentiment are improving, but continued pain over PSU NPAs, it is safer to have exposure in global sectors such as IT and metals.What are your views on public sector banks?PSU banks are facing multiple challenges. NPA problem has been well documented, but they lack capital to lend and grow. Government needs to recapitalise fast. Also, management issues are there, talent is a real concern. Due to lack of recapitalisation, PSU banks are unable to tap retail sector growth and hence are losing market share to private players. They have a good deposit taking franchise. Government should allow mergers and acquisitions and privatisation.