Reserve Bank of India may hike rates by up to 75 bps more: Uday Kotak | Markets News

India’s interest rates will climb further, said Uday Kotak, founder and non-executive director, Kotak Mahindra Bank, in a message to investors for the new Samvat 2083.  

After the Reserve Bank of India’s first increase this year, Kotak expects the policy repo rate to increase by another 50-75 basis points, warning that the tightening is weighing on long-term bonds. 

The warning comes at the end of a turbulent Samvat 2082. Foreign investors pulled money out of Indian equities because valuations were rich, the US artificial intelligence (AI) rally turned India into what Kotak called “more of an anti-AI trade”, and the West Asia crisis sent oil prices sharply higher. The correction has left stocks looking less expensive relative to global markets compared with six months to a year ago, while India continues to offer faster growth. 

He acknowledged that AI is going to change the world while also cautioning that the leverage used by global companies to fund their AI ambitions has led to overvaluation. When that excess corrects, India could benefit from reverse flows. He stressed that India remains exposed to those flows: about $700 billion of foreign portfolio investment remains outstanding. He praised Indian investors for their resilience and patience as they stayed invested even as the markets remained volatile. They “kept faith” in equities even though global institutions withdrew larger amounts in favour of cheaper markets elsewhere. 

Externally, oil prices remain a pressure point since India is highly dependent on them. Kotak said the current account deficit for 2025-2026 was only $26 billion, even after $72 billion of gold imports. He expects higher oil prices to widen the deficit to $65–70 billion in the current financial year, and noted that gold remains a major part of the import bill.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd