Exchange traded funds offering exposure to India, Asia’s third-largest economy, have taken a pounding this year. The average return for the WisdomTree India Earnings ETF (NYSEArca: EPI) and the iShares India 50 ETF (NasdaqGS: INDY) is anything but average as the two are off 22.65 and 16.9%, respectively, year-to-date.

The situation is no better, actually it is worse, with small-cap funds. The Market Vectors India Small-Cap ETF (NYSEArca: SCIF) has plunged 46% this year. Even with the benefit a July 1 1-for-4 reverse split, SCIF has continued tumbling. The ETF closed around $29.40 that day, but closed below $25 Wednesday. [Market Vectors to Reverse Split 7 ETFs]

India’s plunging rupee is one catalyst that has plagued the country’s equities and ETFs. The rupee has touched a series of record lows against the dollar. Earlier this week, the rupee pared its losses, though only slightly, on speculation India’s central bank sold dollars to stem the currency’s decline. On Tuesday, former IMF economist Raghuram Rajan was appointed the new chief of the Reserve Bank of India. [Rupee ETF up Slightly After New RBI Chief Named]

Rajan has his work cut out. With degrees from the Massachusetts Institute of Technology and some of India’s top universities, Rajan has the pedigree to lead a major central bank and he will need all that training and then some as he looks to revive a fallen star of an economy that has disappointed investors for all of 2013.

Market observers are not too optimistic. “When an emerging market currency does not respond positively to policy liquidity tightening, the market is in deep trouble. Therefore, further price weakness in the currency could plausibly drive further weakness in the equity market,” said Nicholas Ferres, investment director, global asset allocation at Eastspring Investments, in an interview with CNBC. 

Ferres did not hold back in his assessment of Indian equities, saying “Indian equities may be a slow moving train wreck that is close to derailment,” according to CNBC. Last week, Goldman Sachs lowered its rating on Indian equities to underweight, saying there have recently been no signs of increased investment demand in India.