Now, EM rout takes a toll on India amid rising deficit

India became the latest epicenter of the nervousness sweeping risky assets as stocks, bonds and the rupee fell. Goldman Sachs Group said emerging-market currencies, which dropped every day but one this month, were undervalued, while Nomura Holdings warned investors not to lump all developing nations together.

The rupee sank as much as 1.3 per cent, while stocks dropped the most since March and bonds fell to the lowest level since 2014. Turkey's lira also weakened, pushing the benchmark MSCI index of currencies close to dropping below its 200-week moving average for the first time since early 2017. South Africa's rand bucked the retreat, extending its advance to a third day.

Though India's currentaccount deficit was narrower than expected, the fact that it widened at all — it was the biggest shortfall in five years - was enough to rattle traders. The government asked the central bank to bolster efforts to support the rupee, Asia's worst-performing currency in the past month, people familiar with the matter said.

Investors have been increasingly concerned about countries with unsustainable current-account and fiscal deficits as well as accelerating inflation and higher-than-average foreign ownership of domestic debt, according to State Street Global Advisors.

These are the markets that are "more prone to global mood swings," said Abhishek Kumar, the London-based sector head for emerging markets, fixedincome beta.