RBI set for 50–75 bps rate hike as Rupee, Oil and Global risks mount, says Bandhan Life

The Reserve Bank of India may raise its policy repo rate by 50-75 basis points in the upcoming cycle, according to Bandhan Life Insurance. Senior Vice President and Head of Equity at Bandhan Life, Avinash Agarwal, stated that the central bank's rate decision would primarily be influenced by domestic macroeconomic factors, rather than the trajectory of US Federal Reserve interest rates.

Avagwal noted that the Federal Reserve could potentially make an additional one or two rate hikes if inflation increases or the labor market remains tight.

Bandhan Life also highlighted the impact of global uncertainties on the Indian stock market, with elevated uncertainties and high valuations making equities more dependent on individual company earnings visibility. The IT sector is expected to face a challenging earnings outlook in the near term, as increased AI spending diverts corporate budgets away from traditional technology services. Meaningful upgrades to IT earnings estimates are not anticipated until the second half of FY27, according to Bandhan Life.

Conversely, the healthcare sector continues to exhibit structural resilience. India's shortage of hospital beds, ongoing capacity expansion by organized players, and sustained private equity interest support the sector. The rupee is anticipated to experience sustained pressure due to a higher oil import bill, current account dynamics, and global dollar strength.

While capital inflows may provide some relief, they are not a long-term solution. For equities, strong Q1FY27 earnings could offer some near-term support, although macroeconomic risks from crude prices, US bond yields, and geopolitical tensions will remain significant factors to monitor.