Introduction to Research Analyst Profession | NISM Series XV
Learn about the role of Research Analysts, including micro vs macro economics, data collection, and the differences between sell-side and buy-side analysts.
Introduction to Research Analyst Profession
NISM Series XV - Chapter 1
Chapter Learning Objectives
Understand the primary role of a Research Analyst.
Learn the basic principles of interaction (Companies and Clients).
Identify the essential qualities of a Research Analyst.
The Need for Research Analysts
Investors often desire to participate in the stock market but face two significant hurdles: lack of time and lack of full-time market expertise. Research is a time-consuming process. Therefore, they hire SEBI Registered Research Analysts to assist in making informed investment decisions.
Data Collection Scope
Micro & Macro Economics: Analyzing individual behaviors vs. aggregate economy.
Industry Analysis: Examining the specific sector of the selected company.
Company Information: Management quality, decisions, and internal factors.
Micro vs. Macro Economics
<strong>Micro Economics</strong><br>Focuses on small, individual units.<br><br>Examples:<br>• Individual customer behavior<br>• Specific market sectors
<strong>Macro Economics</strong><br>Focuses on the aggregate (total) economy.<br><br>Examples:<br>• GDP (Whole economy)<br>• Inflation<br>• Employment/Unemployment
Sources of Information
Local/Economic Data: Government Statistics, Data provided by RBI.
Global Data: International Monetary Fund (IMF), Asian Development Bank (ADB), World Bank.
Company Specific Data: Annual Reports (AR), Quarterly Results, Draft Red Herring Prospectus (DRHP).
Analysis & Decision Making Process
The research process integrates two distinct approaches to form a conclusion:<br><br><strong>1. Qualitative Factors:</strong> Focuses on Management Quality and ethical perspectives.<br><br><strong>2. Quantitative Factors:</strong> Focuses on the company's performance in terms of profit, revenue, cash flow, and measurable metrics.
Types of Research Analysts
Sell Side Analyst: Work for firms that sell research (e.g., Investment Banks, Brokers).
Buy Side Analyst: Work for firms that buy securities for their own portfolios (e.g., Mutual Funds).
Independent Research Analyst: Provide unbiased research on a subscription basis.
Sell Side vs. Buy Side
<strong>Sell Side:</strong> Reports are publicly available. Recommendations include Buy, Sell, or Hold. Income is generated through brokerage.
<strong>Buy Side:</strong> Research is for internal investment (not public). Used by Asset Management Companies (AMCs) to generate returns for clients. No brokerage generation.
Independent Research Analysts sell their research on a subscription basis, take no brokerage, and provide customized reports without holding their own conflicting investments.
Independent Model
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