📑 Chapter Navigation
📖 Complete Course Navigation
Foundation (Ch 1-4)
- Ch 1: Research Analyst Profession
- Ch 2: Securities Market
- Ch 3: Terminology
- Ch 4: Research Fundamentals
Analysis (Ch 5-8)
Advanced (Ch 9-13)
Annexures (Ch 14-16)
📚 Learning Objectives
After studying this chapter, you should know about:
- Role of a research analyst
- Primary responsibilities of a research analyst
- Basic principles of interaction with companies and/or clients
- Important qualities that are desired in a Research Analyst
Understanding the Role
The Phone Buying Analogy
Imagine you've decided to buy a new phone. What would be your process?
- Set a budget for your purchase
- Shortlist brands that fit your requirements
- Compare technical specifications
- Decide what matters most (battery life, camera quality, processor speed)
- Make an informed decision
This is exactly what Research Analysts do! They help clients make investment decisions through Research (gathering information) and Analysis (processing data).
A Research Analyst is a person who, for consideration, is engaged in the business of providing research services and includes a part-time research analyst.
Last amended: February 10, 2025
View Official Regulation
Information Sources for Research Analysts
Data and information are imperative to the function of research analysts. RAs need information from multiple levels:
Macro-Economic Information
- Government Statistics: Ministry of Finance, Ministry of Corporate Affairs
- Reserve Bank of India (RBI): Monetary policy, interest rates, inflation data
- International Agencies:
- International Monetary Fund (IMF)
- Asian Development Bank (ADB)
- World Bank
- Other Global Development Financial Institutions
Industry-Specific Information
- Industry journals and specialized publications
- Trade associations and regulatory bodies
- Sector-specific research reports
- Market surveys and competitor analysis
Company-Specific Information
- Regulatory Filings: Annual reports, quarterly results, financial statements
- Direct Interaction: Meetings with authorized company officials
- Primary Research:
- Plant and factory visits
- Market surveys
- Employee and stakeholder interviews
📊 Practice Data Analysis with Real Company Information
You've just learned about the key information sources Research Analysts use. Now practice analyzing this data with Finmagine's professional tools:
🏛️ Macro-Economic Data Practice
Use tools that analyze RBI data, inflation metrics, and government statistics mentioned in NISM:
- Economic Indicators Dashboard
- Interest Rate Impact Analyzer
- Sector Impact Calculator
🏢 Company-Specific Analysis
Practice with real annual reports, financial statements, and quarterly results:
- 71+ Live Company Reports
- Financial Statement Analyzer
- Ratios Calculator (44+ ratios)
The Two Pillars of Research Analyst Work
1. Research: Collection of information from various sources (as detailed above)
2. Analysis: Processing data to make decisions
- Qualitative factors: Operational efficiency, competitiveness, business plans, work ethics of management
- Quantitative factors: Revenues, costs, profitability, risks to financials
Types of Research Analysts
Research Analysts are defined by the nature of analysis they do, their coverage, and the use of recommendations they provide.
1. Sell-Side Analysts
Who they work for:
Investment banks, broking firms, advisory services
What they do:
- Publish research reports in public domain
- Provide specific recommendations: BUY, HOLD, or SELL
- Include price targets
- Provide earnings expectations for companies
Key Characteristic:
Reports are available to public and help investors make decisions
2. Buy-Side Analysts
Who they work for:
- Asset managers (mutual funds, hedge funds, pension funds)
- Alternative Investment Funds (AIFs)
- Foreign Portfolio Investors
- Portfolio managers
What they do:
- Generate investment recommendations for internal consumption
- Reports circulated only among top management/investment managers
- Guide fund managers on which securities to buy, hold, or sell
- Not available in public domain
Key Characteristic:
Serve the specific needs of their employing organization's investment strategy
3. Independent Research Analysts
Who they are:
Research originators or boutique firms separate from full-service investment firms
What they do:
- Sell research on subscription basis
- Provide customized research reports on specific requests
- Serve diverse clients: investors, institutions, investment bankers, regulators, stock exchanges, fund managers
Types of Reports:
- Investment activity analysis
- Competition landscape studies
- Mergers and acquisition research
- Sector/industry deep-dives
Other Research Providers
Apart from these three main categories, the following entities also provide research reports:
- Newspapers and Media: Financial newspapers, business channels
- Information Consolidators: Platforms aggregating research from multiple sources
In a Nutshell
The role of a research analyst is that of a selector - to conduct comprehensive study of companies, evaluate their past performance, analyze future expectations, and make recommendations based on this analysis.
Primary Responsibilities of a Research Analyst
Core Objective: Research Analysts' primary role is to understand and evaluate the growth prospects of economies, industries, and companies.
-
Understanding the Economy
Historical Context: British economist John Maynard Keynes (1883–1946) believed that governments could change economic performance of industries by adjusting tax rates and government spending.
Since growth depends to a great extent on the economic environment, analysts must understand:
- Macro-economic factors: National income, Inflation, Interest rates, Unemployment
- Fiscal and Monetary Policies and their impact on the economy
- Capital Flows: Foreign Direct Investment (FDI) and Foreign Portfolio Investors (FPIs)
- Savings and investment patterns in the economy
- Global factors that impact GDP growth (export-import transactions)
📖 See Chapter 5 for detailed economic analysis methods and tools
-
Understanding the Industry
Different industries face different challenges and opportunities. Their growth drivers can be significantly different.
Key Areas of Industry Analysis:
- Regulatory Environment: Laws, compliance requirements, licensing
- Business Models: How companies in the industry generate revenue
- Competition Landscape: Number of players, market concentration
- Operating Factors: Key drivers of profitability and growth
- Price Sensitivity of Demand: How demand responds to price changes
- Consumer Behavior: Purchasing patterns, preferences, trends
📖 See Chapter 6 for industry analysis tools including Porter's Five Forces, PESTLE analysis
-
Understanding Companies
Cricket Analogy: Rahul Dravid and Virender Sehwag were both great batsmen, but very different players.
- Statistics: Strike rates, averages, centuries - all different
- Style: Defensive vs. Aggressive approach
- Performance Factors: Pitch conditions, game type, opposition bowling
Similarly, companies in the same industry may vary significantly in their approach, and understanding these differences requires deep analysis.
Two Dimensions of Company Analysis:
Qualitative Understanding
Understanding "WHY" a business is better:
- Why is this business better than peers?
- What are strengths and weaknesses of the business model?
- How qualified and capable is the management?
- What is the company's competitive advantage?
- What is the quality of corporate governance?
Quantitative Understanding
Mathematical analysis of performance:
- Balance sheet trends (last 5+ years)
- Profit and loss patterns
- Cash flow analysis
- Assets and liabilities composition
- Financial ratio analysis
Important Quote: "Competition in the marketplace is not between products and services but between the Business Models of the competing companies." - Dr. Gary Hamel, Management Guru📖 See Chapters 7 & 8 for detailed qualitative and quantitative company analysis
Principles of Interaction
With Companies
1. Pre-Meeting Research
Opportunities to meet company management don't come frequently. Maximize their value:
- Study the Basics: Thoroughly learn about company's products, industry, and competitors
- Review Financials: Examine financial information and previous annual reports
- Track Progress: Understand stated goals and whether they were achieved
- Prepare Questions: Create a clear questionnaire with specific, targeted questions
2. Critical Principles During Interaction
- Independence and Neutrality:
- Maintain unbiased opinions based on factual information
- Don't let personal inclinations influence analysis
- Ensure analysis is based on facts, not narratives
- No Inside Information:
- Make it clear you don't want
- Information should be publicly available only
- Don't seek price-sensitive unpublished information
- Build Strategic Networks:
- Use networks to acquire relevant contacts
- The most insightful person may not be top management
- Look for those responsible for important activities
- Consider stakeholders: competitors, suppliers, distributors, retailers, customers
- Clarity of Questions:
- Prepare clear, specific questions beforehand
- Use a written questionnaire for systematic coverage
- Focus on operations and future prospects
- Cross-Verify Claims:
- Management may exaggerate positives ("rosy pictures")
- Always verify claims before making recommendations
- Seek multiple sources of information
With Clients
Once research and report preparation is complete, analysts communicate findings to clients. Guidelines for effective client communication:
DO's ✓
- Be Realistic: Suggestions based on facts and figures, not optimistic/pessimistic/biased views
- Keep it Simple: Communication should be simple, clear, and concise
- Disclose Conflicts: Reveal any conflict of interest upfront (e.g., if you own shares of the subject company)
- State Assumptions: Clearly mention all assumptions made in analysis
- Explain Jargon: Avoid abbreviations/jargon or explain them in simple words
- Use Technology: Record communications (with consent) for accuracy
DON'Ts ✗
- No Bias: Don't present views influenced by personal inclinations
- No Hidden Conflicts: Don't hide conflicts of interest
- No Excessive Jargon: Don't use technical terms without explanation
- No Shallow Analysis: Don't make recommendations without thorough research
- No False Promises: Don't guarantee outcomes or assured returns
Core Principle
The role of RAs is to collect data from reliable sources, interpret it, and convert it into actionable recommendations. This must be done with:
- Utmost sincerity, honesty, and ethics
- No bias or personal agenda
- Following all SEBI rules and regulations - both in letter and spirit
Important Qualities of a Research Analyst
The job of research analysts requires both quantitative and qualitative skills. An analyst needs high comfort in dealing with numbers for financial analysis while also being methodical, having an enquiring mind, and being discerning about information sources.
The Dual Skill Requirement
Technical/Quantitative Skills: Ability to analyze financial factors, identify trends, and see inter-relationships between different factors
Qualitative Skills: Methodical approach, enquiring mind, ability to understand business models and competitive dynamics
Using these skills, a research analyst determines whether to invest in a particular industry or company.
Essential Qualities
Detailed Quality Breakdown
- Numerical Proficiency: Comfortable analyzing large datasets and complex calculations
- Technical Skills: Expertise in Excel (spreadsheets) and other data analytical tools
- Financial Knowledge: Deep understanding of financial concepts and metrics
- Reading Comprehension: Ability to read and comprehend financial statements and reports
- Questioning Ability: Skill in asking pertinent, insightful questions
- Detail Orientation: Sharp attention to details that others might miss
- Communication Skills: Both written (reports) and verbal (presentations, meetings)
Sample Research Reports - Learning Resources
To understand what professional research reports look like, review these resources:
- BSE Research Reports - Sample equity research reports from BSE
- NSE Research Reports - Research reports available on NSE platform
🎯 Build These Research Analyst Skills with Professional Tools
You've learned about the essential qualifications above. Now develop these exact skills using Finmagine's professional-grade toolkit:
Advanced Financial Ratios Analyzer with 44+ ratios
71+ Live Company Reports with complete analysis
Interactive Company Research Dashboard
Study report formats from 71+ professional reports
Practice makes perfect! Use these tools alongside your NISM studies to build real-world research analyst expertise.
Test Your Understanding
Sample questions from the NISM workbook to test your knowledge:
Question 1: What is the role of Research Analyst?
Question 2: Analysis and Decision making are affected by which factors?
Question 3: Sell-side Analyst generally work for money managers like mutual funds, hedge funds, portfolio managers. True or False?
Question 4: Which qualities are desired in a good research analyst?
Key Takeaways from Chapter 1
- Definition: Research Analysts provide research services for consideration, helping clients make informed investment decisions
- Three Types: Sell-Side (public reports for investment firms), Buy-Side (internal analysis for asset managers), Independent (subscription-based research)
- Three-Level Analysis: Economy (macro factors, policies), Industry (regulations, competition, drivers), Company (qualitative and quantitative)
- Data Sources: Government statistics, RBI, international agencies (IMF, ADB, World Bank), industry journals, company filings, direct meetings
- Independence & Ethics: Maintain unbiased opinions, avoid inside information, cross-verify management claims, disclose conflicts of interest
- Essential Skills: Numerical proficiency, Excel/analytics tools, financial concepts, reading statements, questioning ability, attention to detail, communication
- Core Principle: Convert data into actionable recommendations with utmost sincerity, honesty, and ethics while following SEBI regulations
Continue Your Learning Journey
You've completed Chapter 1! Here's what comes next:
- Chapter 2: Introduction to Securities Market - Learn about market structure and participants
- Chapter 3: Terminology in Equity and Debt Markets - Master key financial terms
- Chapter 4: Fundamentals of Research - Explore research methodologies
- Chapter 5: Economic Analysis - Understand macro and microeconomic factors
