NISM Series XV · Chapter 1: Introduction to Research Analyst Profession

L1 · Foundation

Introduction to the Research Analyst Profession

What a research analyst does, where the information comes from, the three types of analyst, the principles governing interaction with company managements and clients, and the qualities the job demands.

10 min read · Worth 1% of the paper · Written from pages 15–21 of the official NISM workbook · Updated 17 September 2026

Where this chapter sits

Chapter 1 carries just 1% of the paper. It is the smallest chapter in the Research Analyst syllabus. But it sets the words and the ethics used in every chapter that follows. One or two marks here are worth as much as one or two marks anywhere else.

The exam: 120 minutes, 100 marks, 60% to pass, and 25% negative marking. You need 60 marks, and every wrong answer costs a quarter of a mark. On a chapter this small, answer what you know and move on.

What a research analyst is

The legal definition comes first, and it is worth knowing word for word:

As per SEBI Research Analysts Regulations, 2014, a Research Analyst means a person who, for consideration, is engaged in the business of providing research services, and includes a part-time research analyst.

Two parts of that sentence get tested. The work is done for consideration, that is, for a fee. And a part-time research analyst is included.

The workbook explains the job with a simple example: buying a phone. You fix a price range. You short list a set of brands. You compare the technical specifications. Then you decide based on what matters to you — the battery life or the megapixels of the camera.

This process is very similar to the kind of work Research Analysts do. It has two halves, and they give the job its name:

Research — collection of information from various sources
Analysis — processing of data to take decisions

In short, the analyst studies companies, evaluates their past performance, judges how a company is expected to perform in the future, and makes recommendations based on that. In the workbook's phrase, the role of a research analyst is that of a selector.

Where the information comes from

Data and information are imperative to the function of the research analyst. An analyst needs facts about the economy, the industry and the company.

Type of information	Source
Economic	Government statistics and data provided by the central bank, i.e. the Reserve Bank of India
Global factors	International agencies such as the International Monetary Fund (IMF), Asian Development Bank (ADB), World Bank and other Global Development Financial Institutions
Industry/sector	Industry-specific journals and publications
Company-specific	Financial statements and Annual reports filed as part of regulatory compliance requirements; meeting officials of the company authorized to provide it; and other sources such as plant/factory visits, market surveys and employee/stakeholder interviews

Qualitative and quantitative

Every decision mixes two kinds of factor.

Qualitative factors shape how well a business runs. Examples are efficiency of operations, competitiveness, business plans and work ethics of the management.
Quantitative factors are the numbers: revenues, costs, profitability and risks to these financials.

So analysts spend a lot of time meeting companies and others. They gather data, study it, and then decide whether to buy, hold or sell a stock.

The three types of analyst

Analysts are grouped by three things: the nature of analysis they do, the coverage, and the use of the recommendations they provide.

Type	Who they work for	What happens to the research
Sell-side Analysts	Firms that provide investment banking, broking, advisory services for clients	Typically publish research reports in public domain on securities of companies or industries with specific recommendation to buy, hold, or sell the subject security, including the analyst's expectations of the future earnings of the company and future price performance of the security ("price target")
Buy-side Analysts	Asset managers like mutual funds, hedge funds, pension funds, Alternative investment funds, Foreign Portfolio Investors or portfolio managers that purchase and sell securities for their own investment accounts or on behalf of their investors/clients	Generate investment recommendations for their internal consumption, circulated among the top management/investment managers of the employer firms. These reports are usually only for internal consumption and are not available in public domain
Independent Research Analysts	Research originators or boutique firms separate from full-service investment firms	Sell their research to others on a subscription basis. Clients could be investors, institutions, investment bankers, regulators, stock exchanges, fund managers. They also provide customized research reports on the businesses or industries or sectors on specific requests — for purposes ranging from investment activity to understanding competition landscape to mergers and acquisition

The quickest way to tell them apart is to ask where the report goes. Sell-side reports go public. Buy-side reports stay inside the firm. Independent reports are sold to subscribers.

Outside these three, newspapers, media and consolidators of information also provide research reports.

The three levels of understanding

Understanding the economy. The workbook names an economist here. British Economist John Maynard Keynes (1883–1946) believed that governments could change economic performance of its industries by adjusting tax rates and government spending. Growth depends largely on the economy, so analysts must understand it.

The areas to watch:

national income, inflation, interest rate and unemployment rate
fiscal and monetary policies and their impact on the economy
flows from Foreign Direct Investment (FDI) and Foreign Portfolio Investors (FPIs)
savings and investment patterns
global factors that impact the GDP growth based on export and import transactions

Understanding the industry. Different industries face different challenges and opportunities. Their growth drivers can differ a lot. So analysts must study each industry's regulatory environment, business models, competition, operating factors, sensitivity of demand to price changes and consumers' behaviour.

Understanding companies. The workbook uses cricket. Rahul Dravid and Virender Sehwag were both great batsmen, but they were two very different players. Their strike rates differed. One was defensive, the other aggressive. Who would do better in a given match? A deeper look at the pitch, the game and the bowling can help, but only with probability and not with certainty.

Companies are the same. Firms in one industry can differ in style, product configuration, business model and customer segment, so their financials can differ sharply too.

That is why the workbook asks for two kinds of understanding:

Qualitative understanding covers the intangible things that help a firm beat its peers: strengths and weakness of the business model, qualifications and capabilities of the management, brand power, employee competencies, customer satisfaction.
Quantitative understanding is based on numbers: balance sheets and profit and loss statements of the last few years, cash flows, assets and liabilities, plus non-financial figures like production, capacity utilisation, employee productivity, geographical expanse, and market share.

Interacting with company managements

The internet gives an analyst a lot of information. But it cannot substitute direct interaction with companies and clients. Talking to management gives a better insight into the vision of the company and its strategy.

There is a risk, and the workbook says so plainly. Management might mislead the analysts by deliberately exaggerating positives about business (painting rosy pictures). The aim is to get positive stories written and push the share price up. So analysts should always cross verify the claims of the management before they recommend.

The four principles:

1. Pre-meeting research. These opportunities do not come very frequently, so use them fully. Before the meeting, learn about the company's products, industry and competitors. Know the financial information. Read previous years' annual reports to see the company's direction and whether it achieved the goals it had set.

2. Independence and neutrality of view. Analysts must have an unbiased opinion and should always hold their independence. Their work should rest on facts, not personal inclinations. And they must make it clear to the management not to reveal any information which is not available in the public domain.

3. Network. Analysts may use their network to get views from professionals and experts. The most useful contact is the person who is responsible for the important activities and understands the heartbeat of the company. That person may not be from top management. Competitors, suppliers, distributors, retailers and customers can also give useful inputs.

4. Clarity of questions. Time with management is used best when the analyst has a clear and specific set of questions. It is advisable to go with a questionnaire.

Communicating with clients

Five guidelines:

Be realistic. Suggestions should rest on facts and figures, without an optimistic, pessimistic or biased view
Keep reports simple, clear and concise
Disclose any conflict of interest beforehand — for example, if the RA holds shares of the subject company
State all assumptions clearly in the report
Avoid jargon and abbreviations, or explain them in simple words

The standard expected: RAs should work with utmost sincerity, honesty and ethics without any bias, and follow all the rules and regulations as specified by SEBI both in letter and spirit.

The workbook also suggests using recording devices when interviewing management and talking to clients — but only after taking their due consent for recording.

The qualities the job demands

The job requires quantitative and qualitative skills. An analyst must be comfortable with numbers, to study financial factors, spot trends and see how factors link together. The analyst must also be methodical, have an enquiring mind, and know where to find relevant information. Understanding business models and competitive dynamics matters too.

The listed qualities:

good with numbers
good Excel (spread sheet) and other data analytical tools
clarity in financial concepts
ability to read and comprehend financial statements and reports
ability to ask pertinent questions
attention to details
communication skills, written and verbal

Think of it like this

Buying a phone is the whole research process in miniature

The workbook opens with this deliberately, and it is worth taking seriously rather than skimming past.

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 battery-life or the megapixels of camera, you take the decision.

Every element of the analyst's job is there. You gather information from multiple sources — the spec sheet, reviews, a friend who owns one. You filter to a comparable set rather than comparing a budget phone with a flagship. You weight the criteria according to what actually matters to the user, not what is easiest to measure. And you reach a decision, knowing it is a judgement rather than a proof.

This process is very similar to the kind of work Research Analysts 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.

The two words are not synonyms, and the distinction matters throughout the syllabus. Chapters 5 to 8 are mostly research; Chapters 10 and 12 are mostly analysis.

Dravid and Sehwag — why two companies in one industry are not comparable on one number

The workbook chooses two Indian batsmen who both succeeded enormously while doing almost nothing the same way.

Rahul Dravid and Virender Sehwag were both great batsmen, but they were two very different players. Their statistics (in terms of strike rate and so on) and their style (defensive and aggressive) are very different from each other.

Ask which is better and the honest answer is: it depends on the situation. If one asks — who would perform better? Then a deeper analysis of the pitch, game type and the opposition team's bowling strengths may help us answer the question, although only with probability and not with certainty.

That last clause is the sentence to carry into every valuation chapter that follows. Research produces probability, not certainty.

Applied to companies: companies in the same industry may vary significantly in their approach towards business. Based on their styles, product configuration, business model, customers segment, their financials could also vary dramatically.

Which is why the workbook insists on two dimensions rather than one. Qualitative understanding is more about understanding the intangible factors... like strengths and weakness of the business model, qualifications and capabilities of the management, brand power, employee competencies, customer satisfaction. Quantitative understanding is based on metrics of performance that are captured as numbers. A strike rate alone tells you very little about which batsman to pick.

The heartbeat of the company is rarely in the boardroom

If you wanted to know whether a hospital was well run, the medical superintendent would give you the official answer. The head nurse on the night shift would give you the real one — she knows whether the equipment works, whether staff turn up, whether supplies arrive.

The workbook says exactly this about company research, and it is easy to miss because it sits inside a short paragraph:

The person who is responsible for the important activities and understands the heartbeat of the company would be the most relevant contact and this person may not necessarily be from top management.

And it widens the circle further: competitors and other stakeholders of the business such as suppliers, distributors, retailers and customers can also provide meaningful inputs to analysts in the research process.

A supplier knows whether payments are slowing. A distributor knows whether stock is moving or being pushed. A competitor knows whether the price cuts are real.

This matters because the official channel has a known bias: it may so happen that the management might mislead the analysts by deliberately exaggerating positives about business (painting rosy pictures) to encourage them to write positive stories to influence the market prices positively. Therefore, it is always advisable for analysts to cross verify the claims of the management prior to their recommendations.

But the network has one hard boundary — analysts must make it clear to the management to not reveal any information which is not available in the public domain.

Key terms in this chapter

Buy-side analyst: An analyst at an asset manager — mutual fund, hedge fund, pension fund, AIF, FPI or portfolio manager — whose reports are for internal consumption and are not available in the public domain.
Conflict of interest: A situation such as the analyst holding shares of the subject company, which must be disclosed beforehand in communication with clients.
Consolidators of information: Entities such as newspapers and media which, alongside sell-side, buy-side and independent analysts, also provide research reports.
Independence and neutrality of view: The requirement that an analyst hold an unbiased opinion based on factual information rather than personal inclinations, and tell management not to reveal information outside the public domain.
Independent research analyst: An analyst at a research originator or boutique firm, separate from full-service investment firms, who sells research on a subscription basis and prepares customized reports on request.
Painting rosy pictures: The workbook's term for management deliberately exaggerating positives about the business to encourage favourable reports and influence market prices — the reason claims must be cross-verified.
Pre-meeting research: The obligation to learn the company's products, industry, competitors and financials, and to read previous annual reports, before meeting management — because such opportunities do not come frequently.
Price target: The analyst's expectation of the future price performance of a security, published alongside a buy, hold or sell recommendation in a sell-side report.
Qualitative understanding: Analysis of the intangible factors that make a firm perform better than its peers — business model strengths and weaknesses, management capability, brand power, employee competencies and customer satisfaction.
Quantitative understanding: Analysis based on metrics captured as numbers — balance sheets, profit and loss statements, cash flows, assets and liabilities — plus non-financial numbers such as production, capacity utilisation, employee productivity and market share.
Research Analyst: Under the SEBI Research Analysts Regulations, 2014, a person who, for consideration, is engaged in the business of providing research services — including a part-time research analyst.
Sell-side analyst: An analyst at an investment banking, broking or advisory firm who publishes research in the public domain with a buy, hold or sell recommendation and a price target.

Check you have understood it

The L1 test for this chapter has 6 questions. Score 60% to unlock L2 Application (worked numericals and scenarios) and then L3 Exam-Ready (NISM-style traps, timed, with this paper's real marking). Tests, the higher levels and full mock exams need a free account so we can track your progress.

Create a free account

Original explanatory writing based on the official NISM workbook for Series XV, which is published and copyrighted by NISM. Check figures against the current edition at nism.ac.in.

Something look wrong? Report it