That was because of a statement
\def\DNrmdefault{cmr}used by \NormalFont in devanagari.sty
The answer was to define \englishfont
and then redefine \NormalFont as follows:\newfontfamily\englishfont{IndUni-P}
\DeclareRobustCommand\NormalFont{\dn@penitshape\englishfont}In the end, this is all transitional nonsense, of course, since I will get rid of devanagari.sty and use XeLaTeX's internal facilities for the Devanagari in a day or two.