RBI Could Hike 50-75 bps as India Navigates Oil, Rupee and Global Rate Headwinds: Bandhan Life
* AI spending weighs on IT outlook; hospitals retain structural growth appeal
* Healthcare remains a structural growth story despite broader volatility
Amid heightened macroeconomic headwinds and geopolitical uncertainty, the Reserve Bank of India (RBI) may raise the policy repo rate by 50–75 basis points in the current cycle, according to Bandhan Life Insurance.
“The RBI is unlikely to mirror the US Federal Reserve rate path. Any policy action will be based on domestic inflation, growth, liquidity and financial stability. Rate action, if warranted, would be driven more by local factors than by Fed hikes alone,” said Avinash Agarwal, Senior Vice President and Head of Equity, Bandhan Life.
For Indian equities, elevated global uncertainty and relatively firm valuations are likely to keep the market increasingly stock-specific. Companies with stronger earnings visibility and sustainable growth are therefore likely to attract greater investor attention.
The IT sector faces a challenging earnings environment as rapid AI adoption reshapes corporate technology spending. A greater allocation to AI could divert spending from traditional IT services, making near-term earnings upgrades harder to justify. Visibility on an upgrade to IT earnings estimates remains limited till the second half of FY27.
“In contrast, the hospital sector continues to benefit from strong structural drivers. India remains significantly under-bedded per capita, creating a substantial supply gap. Expansion by organised healthcare players, increasing capacity and sustained private equity investment are supporting the sector’s growth despite its capital-intensive nature,” says Agarwal.
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 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. Strong Q1FY27 earnings may provide some support to equities, although the durability of the macroeconomic overhang remains an important factor to monitor.
The Rupee is also likely to remain under pressure from a higher oil import bill, the current account position and global dollar strength. Capital inflows, including FCNR(B) deposits and FPI investments, can provide a useful buffer by strengthening India’s external position and containing currency volatility. However, these inflows are more likely to act as a stabiliser than eliminate underlying structural pressures.
The medium-term outlook is therefore one of managed and gradual rupee depreciation rather than sustained appreciation. While stronger capital flows give the RBI greater room to manage volatility, the currency’s direction will continue to be influenced by global dollar conditions, energy prices and India’s external balances.
Overall, the Indian market is entering a phase in which company-specific earnings visibility is likely to matter more alongside the broader macroeconomic environment. 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.
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