While emerging market stocks struggle to regain their lost footing, India stock exchange traded funds are still lagging behind the group and could continue to languish on uncertainty surrounding elections, high interest rates and elevated inflation rates.

The WisdomTree India Earnings ETF (NYSE: EPI), the largest India-related ETF by assets, is up 0.1% over the past week and down 4.0% over the last month. Meanwhile, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), which follows the broader MSCI Emerging Markets Index, has increased 2.4% in the last week and is only down 1.4% over the past month. [EM ETFs Bounce Back, but Outflows Persist]

J.P. Morgan and Nomura Securities analysts expect Indian equities to remain range bound until general elections in May as what should have been a shoe-in for the business friendly BJP is looking more uncertain due to greater fragmentation in the electorate and on policy, reports Shuli Ren for Barron’s.

“If these trends gain momentum, we would not be surprised to see the markets turn nervous into 2Q CY,” J.P. Morgan said in the article. “This, along with any global risk aversion, remain key risks to market performance over 1H.”

Meanwhile, Nomura Securities points out that India’s equity valuations are trading at 14 times 12-month forward earnings, or around its long-term average.

Growth also remains muted as private consumption, which makes up about two-thirds of India’s economy, slows due to rising inflationary pressures and higher interest rates to combat the inflation. [Inflation Constrains India ETFs]

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