Parth Verma I The Valuation School
NISM XV
Chapter 1
Introduction to Research Analyst Profession
Learning objectives
• Primary role of Research Analyst 7 Companies
• Basic Principle of interaction of research Analyst S Clients
• Qualities of Research Analyst
1.1 PRIMARY ROLE OF RESEARCH ANALYST
They don't have time
-
• Investors/ Clients wants to invest in Stock market BUT
- They are not in stock
market as full time
• So they hire SEBI Registered Research Analyst to help them in their Investment
Decision.
• Research is a time consuming process.
For example:
While buying a smartphone,
• Research Analyst(RA) collects data/information about
you research about
• camera
1. Micro and Macro economics. • Brands
S -> • Price range
small ( Individual unit) Big ( Aggregate means total) • Battery ,etc
Example: Example:
• Individual customer behaviour • whole economy (GDP)
• Individual sector /market etc. • Inflation
• Employment/ Unemployment etc.
2. Industry Analysis related to your selected company on which research is to be done.
3. Company information about management and decisions and other factors.
• Economic information or data from Government Statistics/ Data provided
by RBI
local information
• For global data, - International Monetary Fund (IMF)
- Asian Development Bank (ADB)
- World Bank.
• For company specific data, - Annual Report (AR)
- Quarterly Result
- DRHP etc.
Analysis & Decision making Process = Qualitative + Quantitative factors.
Management Quality
( ethical Company's performance in terms of
' perspective)
profit,revenue,cash,etc l
• That's why it's for RA's important to interact with your company.
• Types of Research Analyst :
Sell side Analyst. Buy side Analyst Independent RA
Parth Verma The Valuation School
Parth Verma I The Valuation School
A. Sell Side Analyst. B. Buy Side Analyst
• publically available • For own investment
• Specific recommendation to buy,sell and hold. • Example:
• Income through brokerage Mutual fund
• Example : Investment Banks, Brokers. Pension fund, etc
Not for own investment Generation of brokerage
Asset Mang Company
(fund manager) has a
Angel Broking Demat team of
&
1
&
T
Research Analyst
Publish a
Research Report
Client buy/ sell stocks by Research on particular
Research Report. stock / security
X S
Now the company can act upon the result
of the research to buy,sell and hold for
their own on behalf of their clients.
C. Independent Research Analyst
+ Full time RA / Boutique firms +. No brokerage ( like sell side )
·
+ sell their research on subscriptions
e+. No own benefits / Investment
basis ( may be monthly, annually, (like buy side)
quarterly, etc) +. They also provide customised
⑲
+. Anyone can be a client
⑲ reports.
# Investor
# Institution , etc.
Apart from above 3 categories : -
Newspaper ,media, Tv also provide research report.
Parth Verma I The Valuation School
m Research
analyst
Study of a
Company
=>
s
Analyse expected
Evaluate past
performance
performance
1.2 PRIMARY RESPONSIBILITIES OF A RA :
RA should know about
↓ ↓ ↓
Economy Industry Companies
ECONOMY
• British economist John Maynard Keynes believed
Government can change the economic performances
P
-By changing/ adjusting tax rates
>
Government spending
INCREASE LIKE
• Focus areas for economy :- CORPORTATE
INFRA
1 Various macro economic factor SPEND TAX CUT
1 Monetary and Fiscal policies
1 Saving and Investment pattern
1 Flow from Foreign Direct Investment ( FDI ) & FPI
1 GDP Growth, Import, Export Transaction
More in chapter 5
Industry understanding :
• you either know everything about the industry, or maybe parts of it
• Whichever company you are researching about, it's important to learn
about the industry too at the same time
• Topics like business models, operating factors etc are needed to be
understand
CHALLENGES = DIFFERENT GROWTH DRIVERS OF
INDUSTRY
Companies understanding : WHEN I WILL BE ANALYSING
COMPANY
There are 2 main factors to understand here
Quantitative Qualitative
Profits, Revenue Management ethics, etc
(All number games)
(Balance sheet, Strength and weakness of the
Income) business model SWOT
ANALYSIS
Comparison with peers
/ COMPETITORS
Example : Rahul Dravid & Virendra Sehwag : Both are great players but different style, same in business.
Depending on the nature of the business, the research can vary according to
their business model, financials ,etc.
Parth Verma The Valuation School
1.3. INTERACTION WITH COMPANY / CLIENT
Internet has a lot of information already but it's always better to
communicate with the company's management
(One on one communication helps always as it is not necessary everything
in internet is correct)
But management can mislead the RAs too
By showing all the positives about company, therefore
Cross checking is important.
Things to keep in mind during meeting :
: When Research Report is done
• meeting se pehele khud thoda research karke aana
Communicate / handover to client is called as Pre Research Meeting.
Company ke baare mein sab pata Hona chahiye
meeting se pehele.
• Independence & Neutral view :
RA collects data / information + Unbiased opinion
+ Independent view
( khud ka dimaag & research bhi use karo bas
company management ya other sources per data k liye
must be from a reliable or dependent mat Rehena , na bias hona)
trusted source
• Network
+ " network is your Net - Worth"
+ Info about company from supplier, distribution or
Recommendations even from customer from competitors and so on..
• Clarity of Questions
give it to the clients + Ask / Prepare with crystal clear question
+ Time mang proper hona chahiye for smooth and clear
answers from management.
Parth Verma The Valuation School
Some GUIDELINES to follow :
• Report must be simple, clear & concise. • Isliye independently Bina
emotions & personal
• Non biased report. agenda se report banana.
• Conflict of interest should be
disclosed before for transparency • Agar kuch assumptions
hai toh disclose / note
Agar RA khud US's company k shares mention karna padega.
hold karat hai Jiski research report usko
banani hai apne clients k liye
• Avoid hard words/ tough
Yaha par psychology & emotional impact words/ jargons.
kar Sakti hai.
• It's advisable to use recording devices while
Interviewing with management
Communicating with clients
But after taking consent only.
It will act as a proof in case of conflict.
Parth Verma The Valuation School
1.4 IMPORTANT QUALITIES OF RESEARCH ANALYST :
• Curious and enquiring mind
Always ready to ask the question.
• Information about the different types of sources for the data/ information.
• Good qualitative and quantitative skills.
Understanding of business Good at numbers
• Clarity in decision making.
• Attentive with good communication skills
• Hands on excel and clarity in financial concept
To be able to read financial statements and report
• Always eager to learn and study about the sector, company, economics etc.
Always up to date with the relevant data.
read sample research reports ( in the NSIM PDF)
Take tests.
Parth Verma The Valuation School
Quiz for Chapter 1: Introduction to
research analyst profession
Total points 19/24
Let's get started !!
Unlock success with our NISM Research Analyst chapter test, a sincere attempt at
providing exam-level difficulty.
Elevate your prep and gear up to ace the test!
Details:
Total Number of Questions = 24
Total Marks for Quiz = 24
This is the practice questions with 1 mark each
This quiz has no negative marking and no time limit.
Disclaimer:
1. In the real/actual exam there will be 100 questions with 1 mark each from all the
chapters weightage wise.The structure of the exam is as follows:
i. Multiple Choice Questions [ 92 Questions of 1 mark each ] which results in 92 marks &
ii. Case-based Questions [ 2 cases (each case with 4 questions of 1 mark each )] which
results in 8 marks.
2. In the real/actual exam there will be a negative marking of 25% of the marks assigned to
the question for each wrong answer which is 0.25 mark per wrong answer. So please keep
that in mind !!
3. In the real/actual exam the questions are not mandatory to solve and you can skip the
questions. There is no negative marking for un-attempted questions.
4. The time duration of the real/actual exam is 2 hours and the passing marks is 60.
5. This quiz is just for practice purpose and it doesn't hold the fact that the same questions
appear in the real examination.
Email *
VISHALGIRI0098@GMAIL.COM
Name *
VISHAL KUMAR GIRI
Mobile Number *
7982205641
What kind of information do Research Analysts need? 1/1
Macro and micro economic factors
Industry-specific information
Company-specific information
All of the above
Feedback
Research Analysts must have the information of macro-micro economics, industry-
specific information and company-specific information for providing more accurate data in
his/her research.
What are the focus areas for analysts to understand the economy? 1/1
Changes in various macro-economic factors
Balance sheets and profit and loss statements
Business models and competition
Regulatory environment prevalent in the industry
Feedback
Macro economics factors like national income, inflation, interest rate and unemployment
rate plays an important role in the economy.
What responsibilities does a Research Analyst have? 1/1
Research Analysts exclusively engage in data analysis.
Research Analysts contribute to the financial planning of their clients
Research Analysts solely participate in data collection.
Research Analysts assist clients in making well-informed decisions.
Feedback
Research Analysts need to communicate their research and findings to their clients for
better outputs.
Analysis and decision-making, the two crucial parameters, are influenced 1/1
by which of the following factors?
Ethical practices of management
Revenue and cost considerations
Operational efficiency
All of the above.
Feedback
Research analysts needs to understand cash flows, profit and loss statements, balance
sheets and industry studies. The job of a research analyst is to examine a company's
balance sheet & grasp its many sections and how they connect to the macro- and
microeconomics of the nation as well as to competitors in the same market area to
develop genuine recommendations.
Sell-side analysts typically serve money managers such as mutual funds, 0/1
hedge funds and portfolio managers who buy and sell securities either for
their personal investment accounts or on behalf of their clients. Indicate
whether this statement is true or false.
False
True
Correct answer
False
Feedback
Sell side analysts are employed by companies that offers the services of investment
banking, brokerage and advisory services to their clients . Sell side analysts accept
assignments to conduct research on a certain company and provide recommendations
about buying, holding or selling.
Which of the following attributes are sought in an effective research 1/1
analyst?
Aptitude for numbers and interpretation
Clear understanding of financial concepts
Capability to read and comprehend financial statements
All of the above.
Feedback
Research analysts should be good with Analytical Skill, Financial Concept understanding,
Numerical Proficiency, Ability to forecast, Quick decision making for making a good
research report.
What do Research Analysts need to understand about industries? 1/1
Analyzing consumer spending on luxury goods
Regulatory environment prevalent in the industry
Business models and competition
Both B & C
Feedback
Research analysts need to know about the rules and regulations along with business
model and competitions that affect the industry they're studying. This is crucial because
changes in regulations can strongly influence how companies operate and compete.
What are the two dimensions in which companies are studied by analysts? 1/1
Regulatory environment prevalent in the industry
Qualitatively and Quantitatively
Business models and competition
Changes in various macro-economic factors
Feedback
Analysis and decision making by analyst is a process of both quantitative factors and
qualitative factors.
What does qualitative understanding of companies involve? 1/1
Understanding the balance sheets and profit and loss statements
Understanding changes in various macro-economic factors
Understanding the regulatory environment prevalent in the industry
Understanding why a particular business is better when compared to its peers
Feedback
Qualitative elements impacting operational efficiency includes work ethics, company
plans, competitiveness and operational efficiency.
What does quantitative understanding of companies involve? 1/1
Understanding the regulatory environment prevalent in the industry
Understanding why a particular business is better when compared to its peers
Understanding changes in various macro-economic factors
Understanding the balance sheets and profit and loss statements
Feedback
Quantitative understanding of companies means looking at their financial statements like
balance sheets and profit and loss statements. Analyzing these numbers helps us
understand how well the company is doing financially.
What did John Maynard Keynes believe about governments and economic 1/1
performance?
Governments can change economic performance by adjusting inflation rates
Governments cannot change economic performance
Governments can change economic performance by adjusting tax rates and
government spending
Governments can change economic performance by adjusting interest rates
Feedback
John Maynard Keynes believed that governments could improve or control economic
performance by adjusting how much money they spend and the taxes they collect.
What is the importance of personal communication with management? 0/1
To substitute direct interaction with companies and clients
To acquire a lot of information
To get a better insight into the vision of the company
To influence the market prices positively
Correct answer
To get a better insight into the vision of the company
Feedback
Personal communication with management is important because it helps us understand
the company's vision and future plans better. It's like having a direct conversation with the
leaders to get insights into where the company is headed
Why should analysts cross verify the claims of the management? 1/1
To acquire a lot of information
To ensure the accuracy of the recommendations
To substitute direct interaction with companies and clients
To get a better insight into the vision of the company
Feedback
Analysts should check the information provided by the management to make sure it's
accurate. This helps ensure that their recommendations are reliable and trustworthy.
What should analysts do before meeting a company's management? 1/1
Thoroughly learn about the company’s products, industry, and competitors
Read previous year’s annual reports
Understand the direction of the company
All of the above
Feedback
Before meeting a company's management, analysts should do these things: learn about
the company, its products, industry and competitors, read previous annual reports and
understand the direction the company is heading.
What should analysts base their analysis on? 0/1
Factual information
Personal inclinations
Opinions of the management
Public domain information
Correct answer
Factual information
Feedback
Analysts should base their analysis on real & verifiable information and not personal
opinions, inclinations, or management's opinions.
Who can provide meaningful insights into a company’s performance and 0/1
plans?
Top management
Competitors
Suppliers
All of the above
Correct answer
All of the above
Feedback
Insights into a company's performance and plans can come from its top management,
competitors, and suppliers.
What should analysts have in mind while communicating with clients? 1/1
Use complex jargon
Stating unrealistic assumptions
Disclose any conflict of interest
Be optimistic in suggesting companies
Feedback
When talking to clients, analysts should tell them if there's any conflict of interest. This
means being open about any situations that might affect how they give advice.
What is expected from research analysts in terms of ethics? 1/1
To interpret data/information with biasness
To follow all the rules and regulations specified by SEBI
To make use of technology without consent
To collect data/information from unreliable sources
Feedback
Research analysts should follow the rules and regulations set by SEBI (or other relevant
regulatory bodies). This is expected for ethical conduct.
What skills are required for a research analyst? 1/1
Quantitative skills only
Qualitative skills only
Both quantitative and qualitative skills
None of the above
Feedback
Research analysts need both quantitative skills (working with numbers and data) and
qualitative skills (assessing non-numeric factors) to do their job effectively.
What is the importance of having good Excel skills for a research analyst? 1/1
To analyze financial factors
To identify trends
To find relevant information
All of the above
Feedback
Good Excel skills are important for research analysts because they use Excel to analyze
financial factors, identify trends, and find relevant information.
What is one quality that a research analyst must possess? 1/1
Ability to understand business models
Ability to ask pertinent questions
Attention to details
All of the above
Feedback
Research analysts should be good with understanding business models to predict the
direction of the company. Asking relevant questions and checking for the correct data for
more accurate data gathering is an essential part for a good research report.
In his study report on the automotive industry, Mr.Shyam offers 1/1
his opinions on the field as well as the best securities to purchase, hold
and sell which is being provided for internal consumption by the
organization's staff. Determine the kind of analyst.
None of the above
Sell Side Analyst
Buy Side Analyst
Independent Analyst
Feedback
Buy side analysts work for money managers such as pension funds, hedge funds, mutual
funds and portfolio managers. Buy side analysts work for their internal consumption of the
firm.
Which is not an essential quality for a Research Analyst? 1/1
Ask relevant questions
Verbal and written communication skills
Preparing research reports based on personal opinion
Good with numbers and excel
Feedback
Research analysts needs to be good with numbers, excel, communication and to be
curious about asking more questions but personal opinions and emotional decisions must
be avoided by the analyst.
Research Analyst should seek information from management which is not 0/1
available in the public domain?
True
False
Correct answer
False
Feedback
Researchers should not try to attempt to obtain important data that isn't in the public
domain and also management should not share any data that is not publicly there.
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