RBI Expected to Raise Interest Rates by 25 Basis Points Next Week

The Reserve Bank of India (RBI) is expected to follow global central banks by raising interest rates, according to experts. The RBI's Monetary Policy Committee may increase the repo rate by 25 basis points next week on October 7.

This move comes after the US Federal Reserve, the Bank of Japan, and the European Central Bank raised their benchmark interest rates in recent months. India's retail inflation has risen to a 20-month high of 4.82% in August, exceeding the RBI's 4% target midpoint for the third consecutive month.

Rajeev Sharan, Head of Research at Brickwork Ratings, noted that the case for raising interest rates has strengthened due to rising retail inflation and crude prices above $100. He added that a 25 basis point hike is now a real possibility, which would be the first increase since early 2023.

Experts recommend considering short-term debt funds in portfolios but do not suggest trimming exposure to equities. Instead, they advise investing in sectors such as financials, industrials, defence, capital goods, and select consumption segments.