Equity Research is basically, the study of equity and stocks for the purpose of investments. The foremost objective of equity research is to contribute investors with the comprehensive financial analysis and guidance on whether to purchase, possess, or sell a selective investment. Bank usually practice equity research as a means of sustaining their investment banking and sales by implementing appropriate, better quality knowledge and interpretation.
Equities include a huge part of a particular company’s funds and stockholders require understanding whether to wait as an investor in the company or sell the shares. The buy-side and the sell-side companies always prefer to invest in sustaining an equity research division.
The function of Equity Researcher
The principal function of the equity researcher is to confer a comprehensive analysis of a company, allowing investors to make an implicated judgment. The research report presented by an equity researcher is used by investment banks and equity firms to assess the company for Initial Public Offering (IPO), Leveraged Buyout (LBO), alliances and others.
The Process of Equity Research
Below are the various steps involved in the equity research process.
1. Economic Analysis
Economic analysis contributes insight into how markets function and offer techniques for striving to foretell future market behaviour in response to cycles, events and trends.
2. Company Analysis
Company analysis is a method conducted by investors to assess securities, accumulates the data associated with the company’s profile, services and products as well as profitability.
3. Industry Analysis
Industry Analysis is a tool that promotes a company’s perception of its position compared to other companies that provide similar products or services.
4. Financial and Valuation Modeling
This is the method of valuing the company and its forte.
5. Financial Statement Analysis
Financial Statement Analysis is the method of evaluating and examining the company’s financial statement to take better economic decisions.
6. Report Writing
The above methods complete in the report writing stage where the equity analyst provides an in-depth report available to appropriate shareholders.
How are Equity Research Segments Composed?
If you want to make a career in equity research, then you should know the composition of the equity research segment which consists of two main positions of Associate and Analyst. Here an Associate work under an Analyst, who has all the responsibilities comprising a collection of different businesses.
Analysts are normally classified into industry divisions to incorporate similar companies in that particular business. Maximum of the divisions have a lot of specific information needed so it makes sense for an analyst to hold on to one business where they can enhance the expertise. A few of the extended divisions in equity research accommodate healthcare, internet, energy, telecommunications, technology, etc.
Job Profile of Equity Research Analysts and Associates
The foremost task in equity research is composing reports. Extending from the instantaneous updates to in-depth reports, the job of an equity research associate of an analyst is to publish regularly.
Qualification Needed for an Equity Research Job
CFA Program is an ideal program to build your career in Equity Research. The CFA curriculum has detailed sub-sections on Economics, Quantitative Methods, Financial Reporting and Analysis, Corporate Finance and Equity Investments. All of these are essential tools in the planning and analysis tool-kit of an Equity Research Analyst. View more here.
2. Post Graduate Program in Investment Banking and Capital Markets (Gateway to CFA Qualification)
If you are pursuing your graduation or are a fresh graduate and want to build a long-term career in Equity Research, then the 10 months – PG Program in Investment Banking & Capital Markets is the essential program for you. This program will groom commerce or non-commerce graduates for jobs in the Equity Research industry. This program follows CFA Level I Curriculum and hence will help you to prepare for Level I also. View more here.
CA provides you with the versatility of operating in all the industries as an auditor, accountant and also an analyst. CA can contribute their assistance in the capital market as well. CAs can establish their own practice and further grow their own clients; they can operate in a CA firm or they can also join companies that can be government, private and public sectors. CA can be practised internationally.
- You are required to possess a substantial knowledge of accounts and financial fundamentals as the maximum of the time, you are supposed to play with numbers.
- Aside from this, understanding about global and local business would be an appended success.
- You should have knowledge of capital markets and the functions.
- If you are an equity analyst, then you are required to have a good communications skills.
- Strong writing skills are required as all the financial analysis needs to be presented in the form of reports or case studies.
- The salary packages of equity researchers are great with the perfect base pay packages and bonus.
- In India, the salary package of entry-level equity research analysts at low-end banks is about Rs. 4 lakh per annum and Rs. 20 lakh per annum at high-end banks.
- Their US equivalent earns about 80,000 USD plus bonuses at the entry level.
- The campus placements are one of the biggest ways to get recruited and commence an outstanding career in equity research.