In remarks prepared for the rally in London on Saturday, Mr Batten claimed the founder of Islam was “a paedophile who kept sex slaves”.
His comments were called “deeply disturbing” and “worrying” by an anti-Islamophobia group.
In a speech provided to The Independent by Ukip, Mr Batten said: “The great British media do not want to talk about the group identity of the rapists, or the ideology that inspires them.
“The rape gang members are predominately followers of the cult of Muhammad.
“They can justify their crimes to themselves because their ideology tells them that non-cult followers are lesser human beings.”
Mr Batten added: “The founder of their cult was himself a paedophile who kept sex slaves. And he is held up to be a perfect model for them to follow for all time.
“But we, the infidels and kaffirs, are not supposed to talk about it. And people who do face possibly criminal prosecution under our so-called ‘hate laws’.”
Campaigning group Hope Not Hate called the speech “shocking” on Twitter, added that his comments about Muslims were “vile”.
Michael Craven, of Tell Mama UK, which monitors anti-Muslim incidents, said he was disturbed by the “inflammatory” remarks about the prophet which he said had been received with cheers.
He claimed one attendee of the rally shouted: “We should hang them all”.
“It was deeply inflammatory. There was a definite tarring of the Muslim community as a whole as rapists and paedophiles,” Mr Craven told The Independent.
He said: “He was preaching to an audience of largely white men. The rhetoric was designed to increase isolation and mistrust between that particular group and Muslims.
“I do find it concerning in terms of the impact it will have on relations with the Muslim community and the levels of abuse and hate crimes that Muslim people may receive.”
Mr Craven added that Tell Mama UK had recorded a rise in physical attacks on Muslims, and he was concerned that the political party leader’s speech would “further exacerbate it”.
“It is deeply disturbing and worrying,” he said.
Mr Batten took over as interim leader of the Ukip party in February, and he was elected in April.
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