Exploring India’s Cyclical Sector: Identifying Top Performing Stocks

Published on December 18, 2025 | 3 min read

Shares of Antony Waste have gained 5% in the last month, while they have slipped 18% in six months. Image: Shutterstock

Cyclical stocks are shares of companies whose performance is linked to the economic cycles. The companies issuing cyclical stocks are involved in manufacturing products that have high demand during economic booms.

Cyclical stock prices are a reflection of the economic conditions as during high economic growth, cyclical stock prices rise. And during economic downturns, the demand for such goods decreases, causing their stock price to fall. Because of their high-return capability amid economic turns and potential to outperform the broader market, investors add cyclical stocks to their portfolios.

What Are Cyclical Stocks?

Cyclical stocks are shares of companies whose profits are directly linked to the economic cycles. These companies benefit from economic growth as it increases the demand for their products, increasing their revenues. These stocks usually belong to sectors such as automobile, steel industries, real estate, construction, banking, capital goods and infrastructure, etc.

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For example, in times of economic boom, an individual is more likely to buy a house due to the availability of credit and disposable income. But during economic downturns, the real estate sector is hit hard as people don’t wish to buy homes, leaving projects unsold.

Cyclical Sector in India

Cyclical stocks are high-return potential stocks and can be good investments if you can identify economic patterns. The following are cyclical sectors whose stock performance is tied to India’s economic cycles.

Automobile

The automobile sector is correlated to economic growth. A car is not a necessity but a luxury, which an individual would buy only if they have discretionary funds or access to affordable loans. Profitability of companies such as Tata Motors Ltd, Maruti Suzuki Ltd and Mahindra & Mahindra Ltd is deeply impacted during economic recessions when people avoid making big purchases. This results in a fall in their stock prices.

Steel & Metal

When an economy is growing, infrastructural development increases, which boosts the demand for steel and other metals. Performance of companies such as Tata Steel Ltd, JSW Steel Ltd and Jindal Steel & Power Ltd is tied to government construction projects, real estate development and private sector industrial demand.

Real Estate

The real estate sector is heavily reliant on economic growth, since economic growth boosts property purchases and construction demand. Whereas, during slowdowns, properties are left unsold and projects are delayed.

Banking Sector

Revenue of banks such as State Bank of India, ICICI Bank Ltd, and HDFC Bank Ltd are significantly dependent on economic conditions. When the economy is in the growth stage, demand for loans increases, repayment capability of the borrowers improves, reducing Non-Performing Assets (NPA).

Capital Goods & Infrastructure

Companies in the infrastructure sector rely on government capital expenditure and projects for their revenue. During economic downturns, the government shelves new infrastructure projects, damaging the profitability of infrastructure and capital goods companies.

How Economic Cycles Impact Cyclical Sectors?

Understand how different economic phrases impact cyclical sectors' stock prices so you can make informed investment decisions and effectively manage your portfolio risk.

Expansion Phase

During the expansion phase, corporate investments increase due to strong consumer confidence, fueling the demand for cyclical products. This benefits cyclical companies by increasing their revenue, appreciating their share price.

Peak Phase

During the peak phase, cyclical stocks may be overvalued and the economy may show some signs of slower growth. Investors may consider adjusting their portfolio and adding defensive stocks that perform well during recessions or contracting phases.

Recession

During a recession or contracting phase, consumer spending reduces with weak industrial demand. In this period, cyclical companies experience a sharp decline in earnings, leading to a fall in their stock prices.

Recovery Phase

In the recovery phase, the economy is slowly becoming stable and may move towards the expansion phase again. This is the right time to invest in cyclical stocks while their valuation is still low with high potential for growth and significant returns in the long run.

How to Identify Cyclical Stocks?

Cyclical stocks can be a great addition to your portfolio and are quite easy to identify. They usually possess the following characteristics.

Beta

Most of the cyclical stocks usually have a Beta value greater than 1 (ꞵ > 1), typically above 1.2. This shows the volatility of cyclical stocks and their sensitivity to economic cycles.

Industry Classification

Companies that sell products and goods that consumers would buy only if they had disposable income, and come under cyclical stocks. These companies belong to sectors such as travel, real estate, and automobiles, etc.

Earnings Pattern

Cyclical companies exhibit significant earnings fluctuations across different quarters, signalling cyclical business models. These companies often produce goods and products that are high in demand during economic booms and have low demand during downturns.

Economic Indicators

Cyclical stocks are heavily correlated with economic indicators such as GDP growth, consumer spending and industrial output. The earnings and stock prices of these companies are highly sensitive to economic fluctuations.

Cyclical sector stocks in your portfolio can offer high-return potential in the long term. If you can identify and predict the current and next economic phase, you will be able to identify which cyclical stocks you should invest in.

About Author

Mariyam Sara

Sub-Editor

holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.