Well-documented is the fact that 2013 has been a dreadful year for exchange traded funds that track India, Asia’s third-largest economy.

Year-to-date, India ETFs are by far the worst performers of the major single-country BRIC ETFs. Additionally, India funds have not been able to keep pace with broader emerging markets ETFs like the iShares MSCI Emerging Markets ETF (NYSEArca: EEM). The WisdomTree India Earnings ETF (NYSEArca: EPI) is down 13.2% this year while EEM is off just 1.2%. EPI has been 910 basis points more volatile than EEM.

Indian equities have been plagued by a weak rupee, widening current account deficit and a government viewed by outsiders as ineffective at curing the country’s economic ills. There is good news: India ETFs have started to turn around. In the past month EPI is up 6.1%. [Why India ETFs Are Soaring]

There have been legitimate catalysts. Last week, it was revealed that through a deal with the World Bank, India will launch its first offshore rupee bond effort, worth $1 billion. That news was followed by reports that said India was in talks with J.P. Morgan, Barclays and Citigroup about gaining entry into those banks’ emerging markets bond indices. [Your EM Bond ETF Might Add This Country]

In other words, India is looking to liberalize its debt markets in an effort to attract more foreign investors. India currently caps foreign investment in government debt at $30 billion. Foreign holdings of Indian bonds account for just 4%.

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