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NISM Series XV study materials
NISM Series XV study resources

NISM Series XV: Economic and Industry Analysis

NISM Series XV · Work through your exam, one topic at a time.

All guide sections

Economic and Industry Analysis

What is tested

How macro data and industry structure feed earnings forecasts - the link from GDP, inflation and policy rates to sector demand and pricing power.

Macro variables and where they hit

  • GDP: real growth drives volumes; nominal growth captures inflation. The GDP deflator is broader than CPI or WPI.
  • Inflation: CPI covers services and food; WPI covers traded goods and excludes services. Core inflation strips out food and fuel.
  • Policy: repo rate, reverse repo, CRR, SLR and open market operations set liquidity and the cost of money; the yield curve prices growth and inflation expectations.
  • Activity: IIP, PMI, capacity utilisation, credit growth, trade and current account deficit, fiscal deficit.
  • Indicators: leading (new orders, credit growth), coincident (IIP), lagging (unemployment, bad loans).

Industry frameworks

  • Life cycle: introduction, growth, maturity, decline. Growth industries are not automatically profitable when competition is fragmented.
  • Porter's five forces: rivalry, buyer power, supplier power, new entrants, substitutes.
  • PESTEL: political, economic, social, technological, environmental, legal.
  • Cyclical vs defensive: autos, metals and real estate are cyclical; FMCG and pharma are typically defensive. Concentration (HHI), entry barriers and pricing power determine margin durability.

Worked example

A 50 bps repo cut is announced. A cement analyst checks three links. First, transmission: only 55% of the company's debt is floating, so interest cost falls by roughly 50 bps × 55%, not 50 bps. Second, demand: housing credit growth is 14%, and cement demand tracks it with a two-to-three quarter lag. Third, supply: industry capacity utilisation is 68%, so pricing power stays weak until utilisation crosses roughly 75%. Forecast: volume growth of 7–8% next year, with margin expansion only if utilisation rises. The recommendation is 'hold' until utilisation confirms.

Traps

Treating WPI as a services inflation gauge; equating high industry growth with high company margins; ignoring the lag between a rate cut and demand; applying a defensive label to a company whose end-markets are cyclical.