The Indian stock market was down more than 5 per cent on Wednesday, with the benchmark Sensex down about 15 per cent.
It is the biggest one-day fall in India since the global financial crisis of 2008.
The rupee has lost around 40 per cent against the dollar over the past year.
The currency is also in the process of stabilising, but it is unlikely to regain all of the lost ground this week.
India’s benchmark index fell more than 15 per and 30 per cent, respectively.
The rupee dropped to a four-month low against the greenback on Tuesday, falling as low as 8,200 against the US dollar.