What is Equity Research? A Comprehensive Guide

Equity research is the lifeline of investment banking. It is the base that forms a multi-billion dollar market for investment banks. If you’re looking to start your career in a high-paying role, equity research can be the destination for you.

A prudent equity research analyst is an asset to any financial institution. As long as there is share market investing, qualified equity research professionals will always be in demand.

This blog explores the value of equity research and provides an informative take on how to become an equity research analyst. Not only that, we’ll also inform you about the best platform where you can get certification courses to kickstart your journey as an equity research analyst.

What is Equity Research?

Equity research is all about producing research reports, price projections, and recommendations of stocks based on proper research and study. Equity research involves studying an industry, building company models, analyzing a company’s financials, and questioning management decisions, all while keeping an eye on macroeconomics and global political developments.

Equity research was developed by sell-side firms with the intentions to guide HNI investors with buy/sell recommendations. Over the years, equity research has become an integral part of all buy-side & sell-side firms and thousands of forward-thinking corporations. Currently, it has been a key to strategic decision-making in stock markets all over the world.

As discussed, equity research primarily can be of two types; sell-side equity research and buy-side equity research. Sell-side equity research is done for investment banks/advisories in order to offer investment recommendations as a part of sales offerings. In contrast, buy-side research is done for wealth management firms to make actual investments in a company.

Earlier in the 20th century, equity research was primarily paper-based. An analyst needs to read a lot of reports and graphs. However, as the internet came and changed the course of many professions, equity research has now taken a digital route. Acquiring knowledge has become easy, but the job of equity analysts hasn’t become easier.

What does an Equity Research Analyst do?

As you might have guessed by this point, being a successful equity research analyst is no mean feat. It involves spending days or even months analyzing a company. Following are some tasks performed by an equity research analyst.

Industry Analysis

Reviewing an industry or sector where the target company operates is the first step in company research. Researching a sector’s future conditions, demand, and supply side economics as well as regulatory and legal obligations is necessary to have insights into a company’s future performance.

Inspecting Financial Reporting

A company’s quarterly and annual reports reveal much more info about the company than you can imagine. Although most pages of a report contain customary information, some present vital figures that tell the financial health of a company. Equity researchers are tasked with finding those details.

Management Overview

Management holds the key to success for any public company. They are the people that make all the impactful decisions. So, understanding the management and questioning its decisions is something an equity analyst will often do.

Financial Modeling

Equity research analysts conduct financial modeling of the target company to calculate the impact of future events. It is the process of creating a spreadsheet that features a summary of a firm’s earnings and expenses over the years.

Predicting Valuation

Predicting the true valuation of a business is a tough task often undertaken by equity research analysts. There’s no clear set of rules to decide a firm’s valuation. Instead, one needs knowledge and experience to judge a company’s true valuation.

Other Key Roles of Equity Research Analyst

• Revealing key details of a company to the client
• Predicting price movements
• Advising buy/sell actions based on market movement
• Finding out multi baggers at an early stage
• Inform about abnormalities with a company
• Forecasting sectoral growth

How to Get Into Equity Research

Starting a career as an equity research analyst is a dream job of many. As an equity analyst, you’ll not only be earning a handsome salary, but you will also have the opportunity to climb up the corporate ladder and reach unimaginable heights.

There is no compulsory educational qualification needed to enter into the field of equity research. Being a commerce graduate will definitely help to make your case strong. However, graduates of other subjects can also crack an equity research job. Following are some courses that will provide you with knowledge and credibility to land an equity analyst role.

1. Chartered Financial Analyst (CFA)

CFA is the gold standard of financial certifications. Within the three levels of CFA, you’ll learn everything from economics to derivatives. Conducted by the CFA Institute based in the United States, CFA certification validates your knowledge on financial analysis all over the world.

2. Certified Financial Planner (CFP)

CFP is a worldwide recognized qualification in the field of financial planning and wealth management. Having CFP certification in your resume will not only fastrack your selection in equity research but will also open doors to other positions in investment banking and wealth management.

IMS Proschool has:

• Upskilled 25,000+ students
• Trained 10,000+ professionals
• 100+ in house expert tutors
• 10 offline coaching centers across India

IMS Proschool not only prepares you for the exams but also guides you with complete placement support. Many of our students are now working with top institutes like JP Morgan, Deloitte, ADP, Pepsico, and many more.

Perks of Being an Equity Research Analyst

The biggest perk of being an equity research analyst is the big paycheck that comes with it. The salary of equity analysts in India starts from 8-10 lpa. This is what you’ll be earning upon starting your career. But, as you rise to higher positions, your pay will rise exponentially. A senior analyst can earn up to 25-30 LPA depending on performance.

Other than a hefty salary, listed are a few more benefits of becoming an equity research analyst.

• You will learn almost everything related to wealth management and stock market
• With a niche job role, you will hold a respectable position in the society
• You will get the opportunity to work for any firm in the world including the ones based in the US
• You will be interacting with some big clients who are successful in other fields
• You will gather a deep knowledge and experience in the share market operations

Conclusion

As the number of retail investors in India is rapidly increasing, there is a growing demand for potent equity research analysts. Many online brokerage firms are incorporating free equity research in their platforms. Indian banks are also strengthening their investment banking arm. So, this is the golden period to start your career as an equity research analyst.

If you are going to take up certification courses to accelerate your journey in landing an equity analyst position, you should check out IMS Proschool today. Enroll yourself in an IMS Proschool certification course and give your equity research dreams new wings.

Frequently Asked Questions

1. Is Equity Research the same as Investment Banking?

Although equity research and investment banking have similarities, the end goal is different in both professions. Equity researchers study, analyze and evaluate companies to make investment recommendations. Investment bankers also conduct company analysis. But they do it to make informed decisions about merger or acquisition.

2. What skills do you need for an Equity Research Job?

Equity researchers have to be proficient in a number of areas. First and foremost is a deep understanding of finance, economics and accounting. They also should be able to perform financial modeling and quantitative analysis, for which knowledge in Excel is required.

3. How much does an equity research analyst earn?

Earnings depend on the level of experience one has under his belt. While a newcomer earns a moderate salary of 4-6lpa, a highly-experienced analyst could earn in crores through more than one income stream.

4. Is Equity Research a hard job?

Equity research can be a demanding job at times. Especially once every quarter when companies publish their earnings. During that time, equity researchers work 70+ hours a week. So yes, equity research is a hard and strenuous job compared to many others.