If you have chosen the exciting world of stock markets among the career options you have, you'll never regret it. It is your door to fame, fortune and, above all, professional challenge. In a world that is shrinking in size due to information technology and blurring boundaries between nations, the stock market (or the equities market) is all set to grow in size.
A quick overview of the roots
The "company" form of organization changed the way the world did business. The company raised the capital required to do business by issuing financial instruments (or assets) called "equity shares" to the general public. Such a purchase of shares from the company itself is a "primary market" activity. Such a purchase did not tie the investor to the company forever because they could sell these shares in the "secondary market" (or in other words, the stock exchange) unlock their investments.
Purchase of equity shares in the market offered high returns to the investors. Apart from the dividend income that they received, the investors also made capital gains when the share prices shot up due to various reasons. Over and above these financial benefits, equity shares
also gave ownership and control of the company in the same proportion as the number of shares held.
These heavy returns do not come without associated risks. Good amount of subjectivity and ambiguity is involved in finding the true value of an equity share. This renders difficult, the decision regarding proper investment.
The emergence of professional research
Common man could not understand the nuances of stock market and equity valuation. Also, the concept of pooled funds like insurance funds, retirement funds and mutual funds required professional investment management. Consequently, the field of market analysis emerged and gave rise to finance professionals who excelled at valuation of such financial assets. Market analysts (a.k.a research analysts or equity researchers) work for various organizations like:
Investment Banks,Mutual funds,Financial Institutions,Stock Brokers, Financial newspapers, Financial websites.
They can also work as Independent Financial Advisors to the affluent people who need professional expertise for managing their wealth.
As a market analyst one has to use various financial models, tools and techniques to arrive at simple decisions like buying or selling or standing still regarding the particular stock. If the research and analysis show that the stock price of a particular company may rise, you "go long" (buy it). If you have already bought it, you "hold" it. Alternatively, if the research indicates a possible downtrend in the stock price, you would immediately "go short" (sell it) so that you don't incur a loss (or reduced profit) at a later date. When once the decision is taken, there is absolutely no time to spare in implementing it.
The nature of work
Two basic approaches to equity research are the "fundamental analysis" and the "technical analysis." As a Fundamental analyst you would study the various factors that affect the stock prices. The analysis is done in the EIC (Economy-Industry-Company) format. First you study the economic factors like interest rates, inflation, national income, political factors etc. Then you study the particular industry to which the company belongs. It could be steel, cement, information technology, pharmaceuticals etc. Ultimately, the financial and other aspects of the particular company are studied.
As a technical analyst, you will study the price movements of the particular company's stock in the market. Technical analysts strongly believe that the price movements follow a trend and by identifying the trend, one can accurately predict the price that might occur in future. Technical analysts use financial tools with software support. One can be overawed by the terms and studies of a technical analyst when he/she explains the rationale behind the prediction.
General abilities
To become a successful analyst, one has to possess remarkable analytical, logical and interpretative skills; number crunching abilities; creativity in identifying the appropriate factors of study and high presence of mind. One should also be meticulous and hard working with high concentration powers. The work also involves hours of gazing at numbers, graphs and other figures, apart from the narrative information like corporate releases, CEO's talks and other sources of market data.
One should also possess skills to discriminate relevant information from the irrelevant and apply the relevant ones accordingly. Working long hours and an attitude for relentless search is essential. This also calls for high determination and perseverance.
Educational qualifications
To work as a market analyst, you would be required to do an MBA in Finance. Other qualifications include MA in Economics (Ivy League preferred). An ideal option would be to do the CFA (Chartered Financial Analyst) done from the ICFAI (Institute of Chartered Financial Analysts of India). Mathematical abilities and a background in accountancy are significant requirements. All these would come as effective complementary skills to a strong foundation in financial concepts.
As you can expect, the MBAs from the premier league enjoy high demand from the industry. They include the various branches of IIM; XLRI; XIM; Jamnalal Bajaj Institute of Management; NMIMS; FMS; BIM and Symbiosis Institute of Management.
Remuneration and Career Prospects
At the entry level the salary can range from Rs.1 lakah to Rs.5 lakhs per annum, depending upon the organization you are going to work for. It is quite common for the research analysts to get a huge performance linked bonus upon good analysis and research results. In due course, you might be handling funds worth several hundreds of crores of rupees and nominated as an asset manager, fund manager, portfolio manager or simply money manager.
For the more entrepreneurial among you, there is also a scope for starting your own investment advisory services firm or wealth management consultancy for High Networth Individuals. It is not uncommon for senior professionals of this field to earn anywhere between Rs.60 lakhs to Rs.5 crores per annum.
