With a decline of close to 30 per cent in the last one year, the BSE Capital Goods index is among the worst performers in the list of sector indices. With a motley group of engineering, electrical, electronic and shipbuilding companies, this index has been underperforming since the 2008 slowdown.

The index' underperformance can be primarily attributed to high weights awarded to companies that are dependent on the power sector. ABB, Siemens, BHEL, Alstom Projects and Thermax, to name a few, fall under this category. Dearth of fresh orders in this space (although there has been a recent pick up), besides intensified competition from overseas players have been the key reasons for this sector's underperformance.

At 14.3 times trailing earnings, the index, although seemingly cheap, has been struggling to improve the earnings of companies in its basket.

Suzlon Energy was the worst performer in the basket. Falling 61 per cent in a year, concerns of the company's ability to repay its debt pulled down this stock. Crompton Greaves was another stock that was badly hit as a result of the slowdown in its domestic business as well as in its subsidiaries.

That said, the prospects of the index are tied chiefly to the stock of L&T, what with the stock receiving a weight of 15 per cent. The stock fell over 20 per cent in the last one year.

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