NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
An analyst classifies industries by their sensitivity to the business cycle. Which of the following is the best example of a defensive industry?
Fast-moving consumer goods (staples) is the defensive industry. Demand for daily essentials stays relatively stable across the business cycle. Automobiles, real estate and capital goods are cyclical because their demand falls sharply in downturns.
- AAutomobiles
- BFast-moving consumer goods (staples)Correct
- CReal estate construction
- DCapital goods
Explanation
Defensive industries supply essentials whose demand is relatively stable through the cycle, such as staples, pharmaceuticals and utilities. Automobiles, real estate and capital goods are cyclical, with demand swinging strongly with economic growth.
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