Rudd's reaction came after local Indian community was told by a writer and activist Farrukh Dhondy to take 'some form of retaliation' following the assault outside a bar in Melbourne earlier this week.
Dhondy told a meeting of Indians to take matters into their own hands.
"There really has to be some form of retaliation from the Indian community as a whole. India has to stand up," he told ABC Radio on Thursday.
Rudd, according to media report, said Australia was a law-abiding nation.
"The laws are there for a purpose and that is for all citizens to adhere to them," he said.
When asked what message he had for anyone who took the law into their own hands, Rudd said: "People should not."
Earlier, Victorian Premier John Brumby announced, "We will give police more powers and give police more resources to make sure we get the message out clearly in the community. Anybody who undertakes acts of racism or violence in Victoria will feel the full force of the law."
Brumby, who is to undertake a visit to India next week, said incidents such as the weekend attack on Indian men will make his mission to repair damaged relations between Australia and India all the more difficult.
"Some of the events of the last few months have damaged our brand and the Australian brand in India," he said, adding his government was committed to fixing the problem.
Prime Minister Kevin Rudd is also due to visit India.
"I don't think there is any doubt at all that some of the events over the last few months have damaged our brand and the Australian brand in India," Brumby said.
The attacks have cast a shadow over an education industry worth $14 billion.
Federation of Indian Students in Australia (FISA), a representative body, said assurances by Australian government have fallen flat on making the place secure and safe.
"People are still being bashed, people are still being abused, people are still subject to racist comments," FISA president Amit Menghani said.
"Police promised a zero-tolerance approach but, as far as students are concerned, that has not happened," he said.
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