"OPaL was anticipating that they will be able to get longer-term funds at a comparatively cheaper rate but the market has turned it down, because with the overall increase in risks they want higher premium, which is leading to a supply-demand mismatch," said Nagesh Chauhan, head of debt capital market at Tipsons Group.

Earlier in the day, OPaL ditched a planned 10-year bond offering, and accepted offers only on seven-year bonds to raise 1 billion rupees worth papers at 8.58% coupon.

The bids for the 10-year note were as high as 10.50% from some investors, which forced the company to reject all of them, bankers said.

On Wednesday, AAA-rated state-run company Power Finance Corp was also forced to withdraw a 10-year bond offering, leaving it with the option of raising funds only through three-year notes. It had received bids above 7.80%, traders said.

India's 10-year benchmark bond yield was at 7.47%, up five basis points this week, which has made market participants nervous over the future trajectory of interest rates.

Post the U.S. Federal Reserve's rate hike on Wednesday, some investors expect the central bank's December meeting to lead to a 50 basis points increase, pushing the rupee down further.

"This could have led the investors to expect higher rates in corporate bonds too," said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap.

On Wednesday, the Fed raised rates by 75 basis points to the range of 3.75%-4.00%, and said it will keep raising rates to fight inflation. The RBI repo rate stands at 5.90%, with next rate decision due on Dec. 7.

Some issuers also feel that in the longer term, bank loans are cheaper than bonds, Rockfort Fincap's Srinivasan said.

"If this trend continues, issuers will hesitate to issue longer-tenor bonds, and only opt for shorter three to five-year papers."

(Reporting by Dharamraj Dhutia and Bhakti Tambe; Editing by)

By Dharamraj Dhutia and Bhakti Tambe