Chart of the day: Is the worst over for capital goods space?

Capital goods has been the biggest laggard of the index of industrial production (IIP) components, underscoring the slowing investment cycle in the economy. But investors in capital goods shares may be betting that the worst could be over for these companies, and that the risk-reward ratio at these valuations is reasonable. Check the chart below.

*BSE Capital Goods index % returns in 1 month

Time frame: Jan'11 - Jun' 12