NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
An analyst classifies industries by their sensitivity to the business cycle. Which of the following industries is the best example of a defensive (non-cyclical) industry?
Packaged staple foods and daily-use consumer goods are defensive because people keep buying essentials in both booms and slowdowns, so earnings are relatively stable. Cars, cement and capital goods are cyclical since their demand depends on income growth and investment activity.
- APassenger car manufacturing
- BPackaged staple foods and daily-use consumer goodsCorrect
- CCement and construction materials
- DCapital goods and heavy machinery
Explanation
Defensive industries supply essentials whose demand stays fairly stable through the cycle, as with staple foods and daily-use goods. Cars, cement and capital goods depend on discretionary spending or investment and swing sharply with economic conditions.
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