Uday Kotak says RBI may hike repo rate by 0.75 pc more

Mumbai, Nov 5 (PTI) Financial services veteran Uday Kotak on Thursday said that the Reserve Bank may increase the repo rate by another 0.75 per cent as part of the current rate hike cycle.

     Stating that Indian companies are working to build artificial intelligence-led businesses, Kotak said that a "reverse flow" of equity investments could occur if investors find the valuations of AI-led American companies to be on the higher side.

     "We have seen the first move by RBI. I see another 50 to 75 basis points movement up on interest rates," Kotak, the founder and non-executive director of Kotak Mahindra Bank, said in a special video message posted by the group's broking arm.

     On AI, it said the last year made India look like an anti-AI trade story, where the higher valuations led foreign investors to withdraw money and bet on AI opportunities overseas.

     "The kind of leverage which global companies are taking to fund their AI aspiration is also leading to significant overvaluation in many cases. And India, as it works down the path of building its AI capability, will also benefit from reverse flow should it happen," Kotak said.

     India has other advantages like low valuations relative to other countries and also strong growth prospects, he said.

     As the overhang of excessive investment in AI corrects, we do hope that the foreign portfolio investments will stabilise even in India.

     He said that the Middle East crisis keeps simmering, and pointed to over USD 700 billion of foreign investments still continuing in the country, which keeps Indian markets exposed to external events.

     Kotak asked investors to think medium-term and be strategic in their outlooks by focusing on the quality of companies they invest in.

(This story has not been edited by THE WEEK and is auto-generated from PTI)