Mumbai: The premium Indian equities command versus their emerging-nation peers has narrowed to the smallest since last April and may not rebound soon.

That’s the view from Bank of America Merrill Lynch as the country’s equity benchmark head for its worst monthly drop since October, weighed down by disappointments related to a proposed super-rich tax, tepid earnings, and the lingering credit crisis.

The decline has almost erased the gains that followed Prime Minister Narendra Modi’s electoral victory in May. The focus will now shift to the Federal Reserve’s meeting next week and signs of progress on trade talks, analysts led by Sanjay Mookim wrote in a note.

“With little happening locally, headline Indian indices are now likely to move with EM trends,” they said, maintaining the year-end NSE Nifty 50 Index target of 11,300, little changed from current levels. “We see little upside to markets through the year.”

The analysts said they are reluctant to call a bottom for two reasons:

“Until growth and earnings recover, large-cap index stocks can continue to outperform,” the analysts wrote.

The Nifty is up about 4 per cent this year, with the top 20 stocks accounting for bulk of the increase, the analysts said. The market value of all Indian stocks excluding these 20 is down 27 per cent from levels seen in December 2017, they noted.