Index defragmentation shouldn't cause a performance degradation, but it won't necessarily speed things up either. It depends on how the index is being used.

Single-row seeks, for example, aren't significantly impacted by fragmentation.

Before I can suggest anything about the issue, I'd need to see the execution plan at the very least. Table definitions and the query are usually also needed, but the execution plan is the bare minimum. Can you attach that as an sqlplan file? (Don't copy-and-paste the XML into the forum, in other words. Save the plan as a file and attach that to a post in the forum.)