Research analyst registrations up 50% since 2018 as market booms

Demand rises for tracking new companies, sectors to help investors understand and act on their investment portfolios has also seen a surge

It’s not just the stock market that’s booming. The number of entities providing research services that help investors understand and act on their investment portfolios has also seen a surge.

There were 467 entities that provided such services as of March 2018. This rose 57 per cent to 733 as of March 2021. Another 46 entities have been added to the list in the six months since. The total number of registered research analysts is 779 as of September 13, 2021.

The Securities and Exchange Board of India (Sebi), which regulates the segment, has said that regulations would primarily apply to the organisation rather than individual analysts that the organisation might employ.

“Individuals employed as research analysts with an entity are not required (to) obtain registration certificates from Sebi. The research entity which employs individuals as research analysts is required to obtain (a) registration certificate... The individuals employed as research analysts by research (entities) are required to comply with qualification and certification requirements as specified in the regulations,” said a note on the regulator’s website.  Qualifications include a post-graduate degree in finance or economics.

This would mean that the actual number of research analysts would be a multiple of the registered entities since every organization typically has a team of analysts to track different sectors. Business Standard identified over 250 research analyst registrations which are companies. There are additional individuals who do not appear associated with an organization but are registered as research analysts in their own names.

The increase in the number of stocks that have been a part of this rally has created a demand for research on a rising number of counters, according to Pankaj Pandey, head of research at the retail arm of brokerage firm ICICI Securities (ICICIdirect).

“Previously, the rally was large-cap driven,” he said. The S&P BSE SmallCap index hit an all-time high on Tuesday. The S&P BSE Sensex, an index comprising some of India’s largest companies, had hit an all-time high of 58553.07 a week ago, on 7th September 2021.

An increase in the number of new companies listing their shares for trading on the stock exchange has added to the number of companies that need tracking, according to Pandey. There were 30 new listings in 2020-21, shows data from primary market tracker, the Prime Database Group. There have been another 20 in the first five months of the financial year. This has increased the need for more analysts, said Pandey, as has traction in sectors that haven’t historically been well-covered like the chemical industry.

The number of companies a single research analyst can track is limited, suggested Satish Menon, executive director at Geojit Financial Services. Unlike many jobs where automation can be a multiplier for output, research analysts often have to go and meet management or engage in personal interactions (often also with suppliers, distributors and others) to add quality to their reports. The ceiling on the number of companies a single analyst can track pushes brokerages to hire more people during a boom. This is because they need to step up on the number of companies that they track for their customers in such times.

“It will increase,” said Menon.  

Research analysts at retail brokerages are often expected to have domain knowledge, writing skills, and knowledge of Microsoft Excel. Many hire people out of college. Salaries in a metro city can be Rs 7-8 lakhs to begin with.  Many often move on to institutional brokerages after gaining experience, on account of higher pay; according to those in the industry.