Need of Equity Research Analyst

Imagine you've decided to buy a new phone. What would be your process of selection? For the price range decided, 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 batterylife or the megapixels of camera, you take the decision. This process is very similar to the kind of work Research Analysts (RAs) do, to help their clients take investment decisions. There is Research - collection of information from various sources and then Analysis - processing of data to take decisions. Data and information is imperative to the function of the research analyst. RAs need information pertinent to the investment being evaluated. This would include information about the macro and micro economic factors, industry-specific information and company-specific information. Economic information may be collected from government statistics and data provided by the central bank i.e. the Reserve Bank of India. Data on global factors may be collected from International agencies such as the International Monetary Fund (IMF), Asian Development Bank (ADB) and other Global Development Financial Institutions. Industry-specific journals and publications may be used to collect information on industries/sectors. Company-specific information may be collected from various sources including the financial statements filed by the companies as part of regulatory compliance requirements, officials of the company authorized to provide it and other sources such as plant visits, surveys and interviews. Analysis and decision making process is a combination of understanding qualitative factors that affect operational performance,such as efficiency of operations, competitiveness, business plans and work ethics of the management among others and quantitative factors such as revenues, costs, profitability and risks to these financials. Therefore, RAs spend lot of time interacting with companies and others, accumulating data, analysing it and arriving at a buy, hold or sell call.