NISM Series XV · Chapter 13: Qualities of a Good Research Report

L1 · Foundation

Qualities of a Good Research Report — writing it, rating it, checking it

What separates a report that gets read from the thousands that do not: the five ground rules, the planning-drafting-editing process, fact-based versus view-based sections, what is excluded from the definition of a research report, the rating conventions, and the checklist approach.

12 min read · Worth 5% of the paper · Written from pages 247–254 of the official NISM workbook · Updated 18 September 2026

Where this chapter sits

Chapter 13 carries 5% of the paper. It is unusual among the chapters — there is no arithmetic at all. It is about communication, and about the discipline that keeps an analyst honest.

The exam: 120 minutes, 100 marks, 60% to pass, 25% negative marking.

Why writing matters as much as analysis

Research report is a multipurpose document and does the following: presents an investment idea — provides market perspective — detailed company analysis.

Then the workbook asks the uncomfortable question:

All the research analysts have access to, more or less, the same information i.e., annual reports, quarterly reports etc. In fact, all good analysts and experts of a sector have similar things to say. So how does one stand out and be the best?

Research analysts make a difference by the way in which they present their views, conclusions and recommendations. The communication aspect of an analyst's job is as important as analysis, of which writing research report is one.

That is the thesis of the chapter, and it is worth taking seriously. Everyone reads the same annual report. The edge is in what you make of it and how clearly you say it.

Writing research reports, to an extent, is a creative process: creativity in the sense of how one structures the report and communicates the message. What an analyst does is to take in a lot of financial information and give out an understandable version of what that financial information means.

The five ground rules

The process of converting numbers to views does demand certain qualities. As with many other creative processes, there is no single answer to this question but there are certain ground rules which one can follow to make a good report.

Clarity of Idea
Simplicity of delivery
Presenting the argument clearly
Narrative structure
Create customized reports according to the reader type

The last one deserves emphasis. A report for an institutional fund manager and a report for a retail investor are not the same document with a different cover page.

Planning, drafting and editing

Like any other writing project, compiling research reports also has three important steps — Planning, Drafting and Editing.

The major sections of a research report include: company business, peer group analysis, shareholding pattern, key strengths, key concerns, industry overview, company fundamentals, key financial indicators and financials.

Planning. The writing process has to be planned as to how each section will be approached and assign a deadline to each. As there are many reports to be written and the work load shall be high near quarterly results season, it is important to maintain high levels of discipline otherwise the delay can have a cascading effect on the work.

Drafting. Once done with the planning, work should begin on each section. Generally, each organization has a template of its own and therefore working on a pre-defined structure makes the work a little bit easier.

And then the sentence that explains the whole fact/view split: almost all the sections of a research report are fact based and therefore filling them is more of a copy-paste function but certain important sections require understanding of the business and thorough communication with management.

Editing. Once a draft is ready it should be rechecked for financial figures, spell-checks and grammatical errors and edited accordingly.

And a presentation note: it is also suggested to make use of data visualization software and prepare visual charts to present the data. Visual data is easier to understand than written numbers.

Fact-based versus view-based sections

This split is one of the most examinable things in the chapter.

	Sections	Source of information
Fact-based	Peer group analysis, shareholding pattern, company fundamentals, key financial indicators and financials	Annual reports, quarterly reports, calculations
View-based	Company Business, Key Strengths, Key concerns, Industry Overview	Communication with management, personal understanding of the business and industry

Notice where the analyst's real value sits. The fact-based sections are more of a copy-paste function. The view-based ones cannot be copied from anywhere — they come from communication with management and personal understanding of the business and industry.

What is NOT a research report

"Research report" does not include the following communications:

Comments on general trends in the securities market
Discussions on the broad-based indices
Commentaries on economic, political or market conditions
Periodic reports or other communications prepared for unit holders of Mutual Fund or Alternative Investment Fund or clients of Portfolio Managers and Investment Advisers
Internal communications that are not given to current or prospective clients
Communications that constitute offer documents or prospectus that are circulated as per regulations made by SEBI
Statistical summaries of financial data of the companies
Technical analyses relating to the demand and supply in a sector or the index
Any other communication which SEBI may specify from time to time

This list comes from SEBI's FAQs on regulatory provisions for research analysts (July 2025). The common thread: these are either market-wide commentary rather than a view on a specific security, or communications that never reach clients, or documents already governed by some other SEBI regulation.

Why reports fail

There are thousands of reports prepared after every results season and only a few of them get the attention. What makes the other reports fail?

After observation of many years, the following are a few reasons that are listed out for failure of a research report:

Unnecessary details
Long sentences
No proper structure
Inconsistent views
Complex language

Read this list against the five ground rules and they map almost one to one. Complex language fails simplicity of delivery; no proper structure fails narrative structure; inconsistent views fails clarity of idea.

Rating conventions

In financial markets, while rating stocks, various conventions are used by the research analysts. The prevalent recommendations include: "buy", "overweight", "hold", "underweight" and "sell".

What they are measuring: these recommendations are typically made to reflect the analyst's view on the total returns that the security will make over a specified time horizon, or the returns of the security relative to the returns of the market or to the peer group.

And a crucial caution: different research agencies may have different definitions for each term. The interpretation of the recommendation is also typically mentioned in the research report for the immediate reference of the user.

The workbook's illustrative absolute-return definitions:

Rating	Illustrative meaning
Buy	The stock will deliver more than 10% returns over the next 12-month period
Hold	The stock's return is expected to range between -10% and 10% over the next 12-month period
Sell	An expected return of less than -10% over the period

The timing family: analysts also use recommendations such as 'accumulate' and 'reduce' to reflect a view that triggers for the stock's performance is expected in the defined time frame, which will result in the returns materialising.

The relative-to-sector family: 'Outperformer', 'performer or neutral' and 'underperformer' indicate the expectation of the stock's returns relative to the sector or market. The analyst may even indicate the expected level of out/underperformance.

The relative-to-market family: 'Overweight', 'equal weight' and 'underweight' are ratings used to describe a stock or sector's performance relative to the market. An 'overweight' rating indicates the expectation that the stock or sector will perform better than the market, while 'underweight' indicates a relatively poor performance and 'equal weight' indicates performance in line with the market.

And the reader's duty: it is important to be clear about what the analyst is saying through the recommendation before taking action in line with it.

This matters more than it sounds. An "underperform" on a stock in a sector expected to rise 30% may still mean the stock goes up. A "hold" at one house may be a "sell" at another.

The checklist approach

In the era of information overload, it is easy to drown in the ocean of information around. Also, sometimes, information available at different places is contradictory.

To ensure consistency in the decision making process, it becomes imperative to note down important decision drivers in a disciplined and committed manner.

And the workbook's blunt observation about markets: remember that market rewards disciplined investing and often punishes emotional, distracted and disorganized approaches.

Accordingly, checklists could be a great way for analysts to stay disciplined and methodical when it comes to researching new ideas, maintaining an existing portfolio and exiting positions.

The comparison is deliberate: just as airline and military pilots have used checklists for decades to eliminate avoidable accidents and produce better results, so too can investors use checklists to develop better and more consistent investment behaviours.

Obvious advantages of checklist approach are:

Checklist helps avoid lazy mistakes or short-cuts
Checklist ensures that an analyst always does what he or she intends to do in a disciplined manner
Checklists help in objective and facts based decisions
Checklists leave a decision-making trail that can be modified and corrected with time

The last advantage is the most underrated. A checklist you filled in six months ago tells you what you actually thought at the time — which is how an analyst learns from a mistake instead of rewriting history.

Errors of ignorance and errors of ineptitude

In a popular book "The Checklist Manifesto", author, Dr. Atul Gawande makes a distinction between errors of ignorance (mistakes made out of ignorance), and errors of ineptitude (mistakes made because of incorrect use of knowledge).

He argues that errors of second type can be avoided to a large extent by following a checklist approach to literally everything in life.

The distinction is worth holding on to. An error of ignorance is not knowing that a promoter had pledged shares. An error of ineptitude is knowing it, having it in the annual report on your desk, and forgetting to look. Only the second kind is fixable by a checklist — and it is the more common kind.

The sample checklist

We must state that the questions given in the checklist are only indicative in nature and readers may add/delete/edit the questions to the checklist as per their requirements. Financial parameters taken in the quantitative section are also indicative only for reference purpose.

The checklist has four groups: Qualitative Parameters, Quantitative Parameters, Valuation Parameters and Final Decision Parameters.

Qualitative parameters

Do I understand the business — the first question, and the one that disqualifies most ideas.

Details of technology collaboration, if any.

What is the revenue model — how does business make money. What is segment wise revenue contribution and how it is supposed to change going forward.

Output is a necessity or a choice.

Can other industry/business challenge this industry/business (is there a product substitute). If yes, which and to what extent.

What are distribution channels (marketing infrastructure).

Is the business replicable/scalable/good franchise business.

What is Demand–Supply gap in the industry and sustainability of its gap.

How does business look like a decade down the line? Would it be existing and be more valuable.

What is the moat/competitive advantage/niche/differentiation of company and sustainability of these characteristics.

What is downside/Risks in the business/company/industry.

Does the company have output pricing freedom/ability and sustainability of this pricing power.

Are inputs available without interruption? Pricing power of company on inputs and sustainability of this pricing power.

What is the level of competition in business (major competitors and company's position vis-a-vis competitors)? Are entry barriers in business significantly strong?

What is the quality of management — able, honest and with good integrity.

What is promoter's stake? What are insiders doing (buying/selling by promoters and top mgmt.). Any pledge of shares by promoters.

Any buy back by the company in last three years.

Any major observation from corporate governance report.

Present shareholding pattern. Changes in SH pattern over last 5 yrs. List of top 10 shareholders (with % shareholding).

Is there a catalyst in business.

Can a fool/idiot run this business (Business is simple, output is a necessity and competition is not tough).

And a full SWOT: strengths of company · weaknesses of company and how company is handling them · opportunities to company and how company is tapping them · threats to company and how company is handling them.

Quantitative parameters — with the indicative thresholds

Equity History and important points.

Have the revenues been growing consistently? Do we have visibility of revenues going forward.

Test	Indicative threshold
Stable and growing profitability	NPM > 10% and growth in EPS continuously over last 5 years
Low leverage	D/E < 1 continuously and interest coverage > 3 continuously over last 5 years
Stable and growing return track record	ROE > 15% and ROCE > 15% continuously over last 5 years
Dividend track record	Stable and growing minimum 5 years
Cash flows	Positive operating cash flows and positive free cash flows continuously over last 5 years

Note how often "continuously over last 5 years" appears. The checklist is not asking whether a company had a good year. It is asking whether it has been good every year.

The remaining quantitative questions:

Any important/notable auditors' qualification.

Any important observation from notes to accounts (intangibles, MTMs on outstanding derivatives and guarantees etc.). Any change in the accounting policy with impact on P/L and B/S.

What are company's capex plans in near future and how does co. propose to finance that. Incremental capital — equity and/or debt planned?

Is the company financially disciplined? Am I buying this business for quality of assets, earnings and cash flows?

Valuation parameters

What is Valuation/intrinsic value of the business? How confident I am on valuation.

Is business cheap relative to itself, peers and market on various valuation parameters (Price, P/E, P/BV, Price/Sales etc.) over a period of time (Last 5 years).

What justifies Margin of Safety (MOS). Business is available at what discount to its intrinsic value.

Reasons of market mispricing and likelihood of correction.

That last question is the one most analysts skip, and the most important. If a business is genuinely cheap, why is it cheap, and what will make the market change its mind?

Final decision parameters

The checklist closes with a Final Decision Parameters group — the point at which the analyst commits.

Where to find real examples

Sample research reports are published at bseindia.com/investors/Research.aspx and nseindia.com under corporate equity research reports.

The authentic source

The chapter's own sample question makes a point worth carrying forward: for analysts, the authentic source to check facts on a company is the Annual Report — not research reports and opinions of other analysts, not media reports, not business portals. Those are secondary at best. The annual report is the company's own audited statement of record.

Think of it like this

Every analyst has the same ingredients — the report is the cooking

Ten cooks given identical vegetables, identical spices and an identical stove will produce ten different dishes. The ingredients were never the differentiator.

The workbook puts the analyst's position exactly this way: all the research analysts have access to, more or less, the same information i.e., annual reports, quarterly reports etc. In fact, all good analysts and experts of a sector have similar things to say. So how does one stand out and be the best?

And like cooking, it is partly craft and partly judgement: writing research reports, to an extent, is a creative process: creativity in the sense of how one structures the report and communicates the message.

The job described in one line: what an analyst does is to take in a lot of financial information and give out an understandable version of what that financial information means.

The five ground rules are the technique: clarity of idea · simplicity of delivery · presenting the argument clearly · narrative structure · create customized reports according to the reader type.

And the five ways reports fail are the mirror image: unnecessary details · long sentences · no proper structure · inconsistent views · complex language.

There are thousands of reports prepared after every results season and only a few of them get the attention. The difference is rarely the data.

Copy-paste sections and conversation sections

Filling a form from documents on your desk is one kind of work. Understanding a business well enough to say what could go wrong with it is another kind entirely — and no amount of the first produces the second.

The workbook divides a research report along exactly this line: almost all the sections of a research report are fact based and therefore filling them is more of a copy-paste function but certain important sections require understanding of the business and thorough communication with management.

Fact-based sections: peer group analysis, shareholding pattern, company fundamentals, key financial indicators and financials. Source of information: annual reports, quarterly reports, calculations.

View-based sections: Company Business, Key Strengths, Key concerns, Industry Overview. Source of information: communication with management, personal understanding of the business and industry.

Notice which is which. Key strengths and key concerns — the two sections a reader actually turns to — are view-based. They cannot be lifted from any document, because no document contains them. They exist only in the analyst's head, formed from talking to management and knowing the industry.

And that is where the earlier point lands. If everyone has the same annual report, the fact-based sections of every report will look alike. The view-based sections are the only place an analyst can be better than the crowd — or worse.

The full set of major sections, for reference: company business, peer group analysis, shareholding pattern, key strengths, key concerns, industry overview, company fundamentals, key financial indicators and financials.

A pilot's checklist does not make him a better pilot — it stops him forgetting

An experienced airline captain knows perfectly well that the flaps must be set. He has known it for twenty years. He still reads it off a card before every take-off, because knowing something and remembering it on a tired Tuesday morning are different things.

Just as airline and military pilots have used checklists for decades to eliminate avoidable accidents and produce better results, so too can investors use checklists to develop better and more consistent investment behaviours.

Why an analyst needs one: in the era of information overload, it is easy to drown in the ocean of information around. Also, sometimes, information available at different places is contradictory. To ensure consistency in the decision making process, it becomes imperative to note down important decision drivers in a disciplined and committed manner.

And the workbook's view of what markets reward: remember that market rewards disciplined investing and often punishes emotional, distracted and disorganized approaches.

The four advantages: checklist helps avoid lazy mistakes or short-cuts · checklist ensures that an analyst always does what he or she intends to do in a disciplined manner · checklists help in objective and facts based decisions · checklists leave a decision-making trail that can be modified and corrected with time.

The distinction that explains why it works comes from Dr. Atul Gawande in "The Checklist Manifesto", who separates errors of ignorance (mistakes made out of ignorance) from errors of ineptitude (mistakes made because of incorrect use of knowledge).

He argues that errors of second type can be avoided to a large extent by following a checklist approach to literally everything in life.

Missing a promoter share pledge you had never heard of is ignorance. Missing one disclosed on page 84 of the annual report on your desk is ineptitude — and that is the kind a checklist catches.

"Underperform" does not mean the stock will fall

If a teacher says a student is below average for the class, that is not the same as saying the student failed. In a very strong class, below average can still be a good mark.

Stock ratings work the same way, and confusing the two families of rating is a real and expensive error.

The prevalent recommendations include: "buy", "overweight", "hold", "underweight" and "sell". These recommendations are typically made to reflect the analyst's view on the total returns that the security will make over a specified time horizon, or the returns of the security relative to the returns of the market or to the peer group.

That "or" is the whole point. Some ratings are absolute and some are relative.

Absolute, illustratively: a 'buy' may indicate an expectation that the stock will deliver more than 10% returns over the next 12-month period, 'hold' may indicate that the stock's return is expected to range between -10% and 10% over the next 12-month period and a 'sell' recommendation may indicate an expected return of less than -10% over the period.

Relative to sector or market: 'Outperformer', 'performer or neutral' and 'underperformer' indicate the expectation of the stock's returns relative to the sector or market.

Relative to the market: 'Overweight', 'equal weight' and 'underweight' are ratings used to describe a stock or sector's performance relative to the market. An 'overweight' rating indicates the expectation that the stock or sector will perform better than the market, while 'underweight' indicates a relatively poor performance and 'equal weight' indicates performance in line with the market.

Timing: 'accumulate' and 'reduce' reflect a view that triggers for the stock's performance is expected in the defined time frame.

And nothing is standardised: different research agencies may have different definitions for each term. The interpretation of the recommendation is also typically mentioned in the research report for the immediate reference of the user.

Hence: it is important to be clear about what the analyst is saying through the recommendation before taking action in line with it.

"Continuously over last 5 years" — the phrase that does the work

A shop that made money in eleven months and lost it all in the twelfth had a bad year, whatever the annual total says. Consistency and average are not the same thing, and the checklist is built around that difference.

Read the quantitative parameters and notice how often the same three words appear.

Whether business has stable and growing profitability (NPM > 10% and growth in EPS continuously over last 5 years).

Whether business has low leverage (D/E < 1 continuously and interest coverage > 3 continuously over last 5 years).

Whether company has stable and growing return track record (ROE > 15% and ROCE > 15% continuously over last 5 years).

Whether company has stable and growing min. 5 years dividend track record.

Whether company has good cash flows (positive operating cash flows and positive free cash flows continuously over last 5 years).

Five tests, five years, and "continuously" in four of them. A company that cleared every threshold in four years out of five has failed the checklist — not because one bad year is fatal, but because the checklist is designed to make the analyst notice it rather than average it away.

The same instinct runs through valuation: is business cheap relative to itself, peers and market on various valuation parameters (Price, P/E, P/BV, Price/Sales etc.) over a period of time (Last 5 years). Cheap today against a five-year history, not cheap against a single number.

And a reminder on how to use all of this: we must state that the questions given in the checklist are only indicative in nature and readers may add/delete/edit the questions to the checklist as per their requirements. Financial parameters taken in the quantitative section are also indicative only for reference purpose.

The thresholds are a starting point, not scripture. The habit of testing every year is the part to keep.

Key terms in this chapter

Accumulate and reduce: Recommendations reflecting a view that triggers for the stock's performance are expected within a defined time frame, which will result in the returns materialising.
Buy / Hold / Sell: Absolute return ratings. Illustratively, buy expects more than 10% over 12 months, hold between -10% and 10%, and sell less than -10% — though different research agencies may define each term differently.
Catalyst: A qualitative checklist question — whether there is an identifiable trigger in the business that will cause value to be recognised.
Checklist approach: A disciplined, methodical method for researching new ideas, maintaining a portfolio and exiting positions — modelled on the checklists airline and military pilots have used for decades.
Data visualization: The recommended practice of preparing visual charts to present report data, since visual data is easier to understand than written numbers.
Errors of ignorance: Mistakes made out of ignorance — Atul Gawande's first category in The Checklist Manifesto, which a checklist cannot prevent.
Errors of ineptitude: Mistakes made because of incorrect use of knowledge — the category Gawande argues can be largely avoided by following a checklist approach.
Fact-based sections: Peer group analysis, shareholding pattern, company fundamentals, key financial indicators and financials — compiled from annual reports, quarterly reports and calculations, largely a copy-paste function.
Final Decision Parameters: The fourth and closing group of the sample checklist, after qualitative, quantitative and valuation parameters — the point at which the analyst commits.
Interest coverage: A quantitative checklist test for low leverage — the indicative threshold is greater than 3, continuously over the last 5 years, alongside D/E below 1.
Margin of Safety (MOS): A valuation parameter in the checklist — the discount at which the business is available to its intrinsic value, and what justifies that discount.
Moat: A qualitative checklist parameter — the competitive advantage, niche or differentiation of a company, and the sustainability of those characteristics.
Outperformer / performer / underperformer: Ratings indicating the expectation of the stock's returns relative to the sector or market, sometimes with the expected level of out- or underperformance stated.
Overweight / equal weight / underweight: Ratings describing a stock or sector's performance relative to the market — better than, in line with, and relatively poorly against the market respectively.
Research report (what it does): A multipurpose document that presents an investment idea, provides market perspective and gives detailed company analysis.
View-based sections: Company Business, Key Strengths, Key Concerns and Industry Overview — requiring communication with management and personal understanding of the business and industry.

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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.

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