The S&P/ASX20 Index has "underperformed the rest of the market over the year-to-date, over one year and over three years," State Street equity analyst Olivia Engel said.

Ms Engel noted that the top 20 stocks made up almost 60 per cent of the market capitalisation of the broader S&P/ASX300 Index.

"With such a heavy concentration in indices, underperformance by these heavyweights is likely to be acutely felt by Australian equity investors – and they have underperformed over the past three years by 2.3 per cent per annum."

Performance was based on a "cumulative total returns" criteria.

In calendar year 2016, the underperformance has been even more drastic, Ms Engel said.

The top 20 stocks have declined 0.24 per cent compared to a 3.76 per cent rise in the S&P/ASX300 – a 4 per cent underperformance.

"We wonder if investors are giving up entirely on these names," she said.

Not only had the blue chips underperformed, they were less diverse than the other 280 stocks in the S&P/ASX300.

"It is not even as if these mega-cap stocks offer diversification across sectors," Ms Engel said. "The S&P/ASX20 is even more skewed than the broader market index, with 11 of the 20 constituents being within the financials sector, making up 60 per cent of the weight."

By contrast, financials only made up 25 per cent of the weight of the 280 other stocks in the S&P/ASX300.

"In fact, excluding the 20 leaders creates a less concentrated, more varied index, with decent exposures to broader swaths of the Australian economy than just banks and miners."

But there was light on the horizon for the blue chips, said Ms Engel, who added that State Street was "not willing to give up on them entirely and some of the names should still have a place in your portfolio".

Although earnings expectations for the blue chips had fallen, in terms of 12-month forward price-earnings ratios they were now cheaper than the rest of the market.

Consequently, "there are some very attractive names within the top 20," said Ms Engel. Additionally, they had other attractive characteristics.

"There is a reason these stocks are so large in terms of capitalisation, and some exhibit good-quality, decent valuations, are stable cash-generative, mature businesses with relatively low volatility.

"This doesn't sound too bad when they can be picked up at reasonable valuations."

Other analysts have also backed the rosier assessment of blue chips. Pengana Capital's Tim Schroeders said last week that on an EV (enterprise value) or EBITDA (earnings before interest, tax, depreciation and amortisation) basis BHP Billiton and Rio Tinto were looking reasonable value.

Rio trades on a EV/EBITDA of around 7 for this financial year, and a bit under that on next year's projections, Mr Schroeders said. The corresponding figures for BHP  are around 8.5 and 7.4.

Those valuations aren't "screamingly cheap", said Mr Shroeders, but are "reasonable"  and in line with the industrials' part of the market.

The top 20 Australian stocks in terms of size, from largest to smallest, are: Commonwealth Bank, Westpac Banking Corporation, ANZ Banking Group, National Australia Bank, Telstra, BHP Billiton, CSL, Wesfarmers, Woolworths, Scentre Group, Macquarie Group, Transurban Group, Woodside Petroleum, Westfield Corporation, Brambles, Rio Tinto, QBE Insurance, AMP, Suncorp and IAG.