RBI may raise repo rate by up to 75 bps amid uncertainty: Report

The RBI may raise the policy repo rate by 50-75 basis points amid macroeconomic headwinds and geopolitical uncertainty, a Bandhan Life Insurance report said. It also flagged oil prices, global rates, AI-driven spending shifts and rupee pressure as key market concerns.

New Delhi: The Reserve Bank of India may raise the policy repo rate by 50-75 basis points in the current cycle amid heightened macroeconomic headwinds and geopolitical uncertainty, a report said on Thursday.

The report from Bandhan Life Insurance said that any repo rate action would be driven more by domestic inflation, growth, liquidity and financial-stability considerations than by the US Federal Reserve alone.

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“Elevated global uncertainty and relatively firm valuations are likely to keep the Indian equity market increasingly stock-specific,” the report said.

Companies with stronger earnings visibility and sustainable growth are therefore likely to attract greater investor attention, the report noted.

The IT sector faces a challenging earnings environment as rapid AI adoption reshapes corporate technology spending and could divert budgets away from traditional services, limiting near-term upgrades until at least the second half of FY27.

The Indian market is entering a phase in which company-specific earnings visibility is likely to matter more alongside the broader macroeconomic environment, the report forecasted.

With global rates, oil prices, geopolitical developments and AI shaping corporate spending, investors are likely to differentiate more sharply across sectors and companies based on growth prospects and earnings resilience.

The US Federal Reserve’s rate trajectory will depend on inflation, labour-market conditions, consumer spending and overall economic growth. The Fed could deliver one to two additional hikes if inflation reaccelerates or labour-market conditions remain unusually tight, the report forecasted.

The broader market outlook remains sensitive to oil prices, US bond yields and geopolitical tensions. Prolonged elevated crude prices could weigh on domestic demand and put pressure on India’s balance of payments. Besides, continued disruptions in the Middle East could affect sectors such as chemicals and fertilisers.

A managed and gradual rupee depreciation rather than sustained appreciation is likely in the medium term.

“INR is likely to remain under pressure from a higher oil import bill, the current account position and global dollar strength. Capital inflows, including foreign currency non-resident bank deposits and FPI investments, can provide a useful buffer by strengthening India’s external position and containing currency volatility,” it noted.

However, these inflows are more likely to act as a stabiliser than eliminate underlying structural pressures.