The rupee depreciated to a two-year low on Wednesday as China's currency devaluation move triggered fears on global currency war, leading to a sharp slide in the domestic currency.

The Indian rupee depreciated by more than 1% to Rs 64.85 versus the US dollar, hitting its lowest level since September 2013.

The Chinese authorities unexpectedly devalued the country's exchange rate on Tuesday in a bid to revive the slowing economic activity in the country. The country also allowed the currency to fall further on Wednesday.

Following the move, as other emerging market currencies witnessed a sharp depreciation, the rupee also fell.

"The devaluation of yuan has impacted all emerging currencies including rupee... Currencies with major trade with China have been more impacted," Ashutosh Khajuria, executive director of Federal Bank, told NDTV Profit.

China's central bank, the People's Bank of China (PBoC), defended the devaluation move saying that it is "a free-market reform". However, analysts doubt that the step is aimed at keeping the yuan depreciating for long in order to boost China's slumping exports.

The devaluation measure led to a sharp slide in yuan value, down 4% in the past two days. The yuan depreciation led to a sharp sell-off in global financial markets. Equities, currencies and commodities witnessed heavy losses.

The domestic stock markets fell for the second straight day, with the benchmark BSE Sensex dropping by over 150 points in the early trade.

However, the tumbling rupee has helped the share prices of Indian IT companies to rise despite a weakness in the broader markets.

While the stock prices of Infosys rose more than 2% to Rs 1,131, Tata Consultancy Services (TCS) shares gained over 1% to trade at Rs 2,631.