We’ll start with the chapter 1st of NISM XV Research Analyst Course basically it tells the dimensions of this profession. If you want to come in this profession, which areas you can work. There’re 3 areas of functions you can work on.
Buy side analyst, sell side analyst and independent analyst who’s working as per the client’s requirements.
The research analyst is defined as per its work nature, he/she should be studying a certain area covering an economy, industry, co. or peer competition. After that, he/she provides recommendations to investors to take informed investment decision. Thus, a research analyst never takes any investment decision.
Covering 1st Sell Side Analyst: In market, new securities are getting sold or new securities are bought. Buy side analyst buys the existing securities and sell side sells the existing securities.
Sell side analyst works with investment bankers, broking house (where the brokers gives new recommendations of new investment avenues like ETFs, sovereign bonds, etc.) so indirectly they’re selling the securities. Market makers and commercial banks also does the same work to gain cashflow by selling the securities. Portfolio management services (who provides these services( even they come into sell side analyst.
So these securities are sold to the buy side (who’re invested for a longer duration). You can work either in buy side or in sell side.
Covering Buy Side Analyst, who buys the securities by giving the funds to sell side analysts. Buy side analyst create reports around which company have good financials and in fundraising stage and gives recommendations on risk, reward, & strong securities. These analyst works for mutual funds, private equity, VCs, hedge funds (who invests in different companies). Family offices (Bajaj, Adani, Ambani, etc.) to manage the funds of these houses are handled by buy side analyst. These securities are bought for themselves and not for any third party in between.
Covering Independent Analyst, their clients can be investment bankers, fund managers, family offices, or any regulator to make reports as per the requirements.
1. What is the role of Research Analyst?
a) RAs are only involved in the analysis of data
b) RAs are only involved in collection of the data
c) RAs help their clients take informed decisions
d) RAs help in financial planning of their client
2. Analysis and Decision making, the two imperative parameters involved in are affected by which of the following factors?
a) Management Ethics
b) Revenues and Costs
c) Efficiency of operations
d) All of the above
Note: Imperative means highly important parameters. The decision based on any study which are the factors involved : how much ethically the management is seeing, how much the income gonna come & cost gonna leave, how much effectively the operations gonna work.
3. Sell side Analyst generally work for money managers like mutual funds, hedge funds, portfolio managers who purchase and sell securities for their own investment accounts or on behalf of their clients. State whether True or False.
Note: I said before, sell side analyst don’t do this work. They issue or sells existing securities. Mutual funds, family offices buys securities for themselves or for their clients. So these are buy side analyst and not sell side analyst.
4. Which of these Qualities are desired in a good research analyst?
a) Knack for numbers and interpretation
b) Clarity in financial concepts
c) Ability to read and understand financial statement
d) All of the above
Note: A good RA is the one who’s cleared with all his concepts, reports are concise, don’t have any loopholes, studied every parameter in detail, good numerical knowledge, and take care of all aspects (qualitative + quantitative)
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