These two sectors have remained insulated from the equities sell-off so far

The power sector is expected to be the beneficiary of an advanced summer season and various government initiatives to avoid a power crisis in the country.

Various power utilities shall undertake coal-based power plants maintenance well in advance. Furthermore, NTPC shall be running its 5,000 MW power stations during the crunch period in April and May, while the power ministry has said that an additional 2,920 MW capacity will be commissioned in March.

On the contrary, the power sector has been the worst performing sector when analyzed on a year to date basis. The S&P BSE Power index nosedived nearly 20 percent, followed by the PSU Bank index, which is down 15 percent.

On the other hand, the Capital Goods sector is the only sectoral index, which is outperforming on a year-to-date basis with gains of nearly 3 percent, followed by the IT index, which is flat.

Nearly two-thirds of the Capital Goods index constituents have outperformed the Nifty 50 so far this year. ABB India, Siemens, Thermax, Elgi Equipments and Polycab are some of the outperformers.

Hindustan Aeronautics, a strong defence and aerospace play has been another outperformer with year-to-date returns of 10 percent so far. However, those invested over the last 12 months have seen their returns nearly double.

In an interaction with CNBC-TV18 in January, HAL's CB Ananthakrishnan said that the company’s focus is on combat drones while HAL’s order book is closer to Rs 85,000 crores and additional Rs 15,000 crores is for repair and overhaul orders. The company has also won several orders recently from the Ministry of Defence.

A quarter of the Capital Goods index constituents are currently less than 10 percent away from their respective 52-week highs in a weak market.

Capital goods industry, being an indirect beneficiary of the capex spending, has also benefitted from the government's rising focus on areas like the Railways, thereby aiding players like Siemens.

Despite promising order inflows, some of these companies reported December quarter results that were below street expectations. Therefore, their ask rate for the March quarter is on the higher side, in case they have to meet their growth targets for the year.

For instance, Hindustan Aeronautics will have to clock in revenue of Rs 12,200 crore in the March quarter, to achieve its 8 percent revenue growth for the current financial year. Last March, it reported revenue of Rs 11,561 crore.

The sector has also received recommendations from analysts and fund managers alike. Mihir Vora of Max Life Insurance on March 15 said that he continues to like capital goods and defence as a theme.

Brokerage firm Jefferies also reiterated its buy recommendation on Thermax with a price target of Rs 2,520, saying that the firm is positioning itself to be India's leader in clean water, clean air and clean energy by offering new product solutions.

While FPI buying and selling trends have been erratic this year, a constant theme has been the fact that they have been buyers in capital goods stocks, according to VK Vijayakumar of Geojit Financial Services.

"We are in the middle of a major investment cycle that hasn't changed because of this and the whole theme of China plus one local investments, local manufacturing, from which the investment cycle do benefit – there is no change, it remains very intact," Vikas Khemani of Carnelian Capital Advisors said.

"Whenever these kind of situations arise, same companies, which are kind of growing and will continue to grow, are available at a good price. So, definitely, these are the investment opportunities in those structurally positive sectors," Khemani said.

What is yet to be seen is whether the optimism in the capital goods sector is reasonable in an ongoing rising interest rate scenario and the Government’s infrastructure spending prior to the run-up to upcoming state elections this year, as well as the general elections next year.