NISM Certifications · NISM-Series-XV: Research Analyst · Industry Analysis
Which of the following is an example of a cyclical industry, as opposed to a defensive industry, in industry analysis?
Automobiles and capital goods are cyclical industries because demand for them rises sharply in expansions and falls in downturns, as buyers can postpone purchases. Staples, utilities and chronic-disease pharmaceuticals are defensive with relatively stable demand.
- APackaged staple foods
- BElectricity distribution
- CAutomobiles and capital goodsCorrect
- DPharmaceuticals for chronic diseases
Explanation
Demand for automobiles and capital goods varies strongly with the economic cycle, since purchases can be deferred in downturns. Staple foods, utilities and chronic-care drugs have stable demand and are defensive.
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