LEARNING OBJECTIVES:
After studying this chapter, you should know about:• Role of a research analyst
• Primary responsibilities of a research analyst
• Basic principles of interaction with companies and/or clients
• Important qualities that are desired in a Research Analyst

1.1Primary Role of a 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 battery-life or the megapixels of camera, you take the decision.
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.
Data and information are 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), World Bank 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/Annual reports filed by the companies 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.
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 decision on whether to buy, hold or sell a particular security/stock.
Research Analysts are defined by the nature of analysis they do, the coverage, and use of the recommendations they provide. Let us understand some of them:

Sell-side Analysts - They typically publish research reports in public domain on the securities of companies or industries with specific recommendation to buy, hold, or sell the subject security. These recommendations include the analyst’s expectations of the future earnings of the company and future price performance of the security (“price target”). These analysts work for firms that provide investment banking, broking, advisory services for clients.
Buy-side Analysts - They generally work for 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. These analysts generate investment recommendations for their internal consumption viz. use by the fund managers within organization. Research reports of these analysts are generally circulated among the top management/investment managers of the employer firms as these reports contain recommendations about which securities to buy, hold or sell. These reports are usually only for internal consumption and are not available in public domain.
Independent Research Analysts - They work for research originators or boutique firms separate from full-service investment firms and sell their research to others on a subscription basis. Their clients could be investors, institutions, investment bankers, regulators, stock exchanges, fund managers etc. They also provide customized research reports on the businesses or industries or sectors on specific requests. The purpose of these reports could vary from investment activity to understanding competition landscape to mergers and acquisition etc. Apart from these three main categories, entities such as newspapers, media and consolidators of information also provide research reports. In a nutshell, role of a research analyst is that of a selector - to do a comprehensive study of companies, evaluate their past performance, analyse how a company is expected to perform in the future and make recommendations based on this analysis.