The swap market is pricing in at least a 25-basis-point hike at the October meeting as pricey crude stokes inflation risk in India. Traders have increased bets on monetary tightening after oil prices surged, threatening to push consumer prices above the central bank's target range.

Rising energy costs are feeding through to transportation and manufacturing expenses, complicating the Reserve Bank of India's policy calculus. The swap market now reflects heightened probability of action at the next policy review.

Analysts note that persistent crude elevation could force officials to prioritize price stability over growth support. The rupee's depreciation against the dollar adds further imported inflation pressure.