India raises benchmark rate for first time since 2023 amid inflation pressures

If inflation moderates visibly over the next two quarters and the RBI signals a pause in further hikes, Indian equities and bonds could recover as real yields stabilize and growth concerns ease, while the rupee may consolidate at stronger levels.

Continued rate hikes at a measured pace without clear inflation resolution would likely keep Indian fixed-income yields elevated and equity multiples compressed, with capital flows remaining sensitive to global rate differentials and geopolitical risk premiums.

If inflation persists or accelerates despite tightening, forcing the RBI into a more aggressive hiking cycle, this would put sustained downward pressure on Indian equity valuations and bond prices while potentially attracting defensive foreign capital seeking higher real yields.