NISM-Series-XV: Research Analyst Certification Examination

An Interactive Adaptive e-Learning Enterprise

Chapter 1: Introduction to Research Analyst Profession

Contents

 Primary role of a Research Analyst

 Primary responsibilities of a Research Analyst
 Basic principles of interaction with Companies / Clients
 Important qualities of a Research Analyst

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What is Research?

If you have decided to buy a new phone

for the price range decided, what should
be your process of selection?

You would short list a set of brands,

compare various technical specifications
and depending upon what factors are
important to you - whether it’s the
battery-life or the megapixels of camera
or any other specific requirement, you
take the decision.

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Primary role of Research Analyst (RA)
As per the SEBI Research Analyst Regulations 2014, “Research Analyst” means a
person who is primarily responsible for

i. Preparation or publication of the content of the research report; or

ii. providing research report; or
iii. making 'buy/sell/hold' recommendation; or
iv. giving price target; or
v. offering an opinion concerning public offer

with respect to securities that are listed or to be listed in a stock exchange.

In nutshell, role of a research analysts is that of a selector - to do a comprehensive

study of companies, evaluate their past performance, analyse how a company is
expected to perform in the future and make recommendations based on this
analysis.
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Type of Analysts

Sell-side Analysts Buy-side Analysts Independent Analysts

Makes Money through fees Makes money through Earns money through
& Commission buying low and selling high subscription

• Investment Banking • Mutual Funds • Major Clients :

• Corporates • Hedge Funds • Investors, institutions,
• Pension Funds Investment Bankers,
• Sales & Trading
• Portfolio Managers Regulators, Stock
Research
Exchanges, Fund
• Commercial Banking • Institutional Investors
Managers etc.
• Other Advisory services

Apart from these three main categories, entities such as newspapers, media and
consolidators of information also provide research reports. 5
Primary Responsibilities of a Research Analyst
Analysis of Analysis of Analysis of
Economy Industry Company

• Macroeconomic • Business Model • Qualitative factors

factors like GDP, • Key Industry • Efficiency of
National income, Drivers operations
Inflation, • Regulations’/ • Pricing Power and
Interest rate, Legal Framework Sustainability
Unemployment • Competitiveness
• Competition
rate • Business plans
• Product Demand
• Fiscal and • Work ethics of the
Monetary • Consumers management
Policies behavior etc.
• SWOT Analysis
• Foreign Direct • Quantitative
Investment (FDI) factors
and Foreign • Revenues, costs,
Portfolio profitability and
Investors (FPIs) risks to these
• Savings and financials
investment • Peer Comparison
patterns etc.

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Basic Principles of Interaction with Companies / Clients
Personal communication with
management helps RAs to get a
better insight in to the vision of the
company and its strategy to acquire
the desired goals.

However, Research Analyst needs to

cross verify the claims of the
management prior to their
recommendations.

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Steps to cross verify the claims of Management
• Product, Industry, Competitors
• Financial Information
Pre-meeting Research • Previous Annual Reports
• Analysis of previous target achievement

Independence and Neutrality • Unbiased Opinion

of view • Factual Information

• Competitors
• Suppliers
Network • Distributors
• Customers

Clarity of questions • Questionnaire with clear and specific set of questions

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Recommendations based on analysis are communicated to client
through research report maintaining the certain guidelines
• Recommendations should be realistic based on facts
and figures and not contain an
optimistic/pessimistic/biased view on the subject
company.
• Communication, done through written research
reports, should be simple, clear and concise.
• If there is any conflict of interest (e.g. RA holds
shares of the subject company), such information
should be disclosed beforehand.
• Assumptions, if any, must be clearly stated in the
research reports.
• Abbreviations/Jargons should either be avoided or
explained clearly in simple words.
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Important Qualities of a Research Analyst
• Good with numbers
• Good with Excel/spreadsheet and other
data analytical tools
• Clarity in financial concepts
• Ability to read and understand financial
statements and reports
• Ability to ask pertinent questions
• Attention to details /depth of the matter
• Communication Skills – Written and Verbal

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Thank You

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DISCLAIMER
The following presentation is for educational purpose only. All symbols and investment/ trading ideas discussed
by instructors are for demonstration purposes only and are not recommendations to buy or sell into any asset
class.

This information may demonstrate certain hypothetical trading strategies with the use of software(s). Please
note, hypothetical or simulated performance results have certain inherent limitations and do not represent
actual trading. Simulated trading are generally designed with the benefit of hindsight. No presentation is being
made herein, that any account will or is likely to achieve profits or losses similar to those shown here. This
demonstration is not a recommendation to buy or sell financial instruments, but rather guidelines to interpret
and use specific indicators and features within the software.

We strongly suggest that information and techniques presented should only be used by investors who are
aware of the risk inherent in trading. www.elearnmarkets.com will have no liability for any investment
decisions based on the use of information and/ or techniques shown in this presentation.

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