Cyclical stocks are shares of companies whose earnings and stock prices are closely tied to the economic cycle—performing strongly when the economy is growing and weakening when conditions deteriorate. Sectors typically considered cyclical include automobiles, metals, cement, real estate, infrastructure, and banking. In India, stocks like Tata Steel, Maruti Suzuki, and Larsen & Toubro are often classified as cyclical plays. Investors with the ability to time economic cycles—buying cyclicals early in a recovery and reducing exposure before the cycle turns—can generate significant outperformance, though timing such moves correctly is notoriously difficult.
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