Research analysts fail to keep pace with swelling stock investor base

There's only one RA per 73,000 investors now, as against one per 44,000 before pandemic

Research analyst numbers have grown slower than India’s base of stock market investors.

 

The number of registered research analysts (RAs) grew to 1,584 as of June 2025 from 620 in 2018-19. The number of unique investors has grown to 116.2 million from 27.5 million over the same period. The slower growth of RA registrations has meant that there is only one per 73,000 investors now, compared to one per 44,000 investors before the Covid-19 pandemic.

 

The Securities and Exchange Board of India (Sebi) recently released frequently asked questions (FAQs) around RA regulations. A regulated RA essentially brings out reports that can provide the basis for investment, for example, examining the fundamentals of a company to determine whether the shares of the business are worth buying. Registrations can be in individual capacity or as an organisation. An organisation would consist of more than one analyst and numbers would improve accordingly. But overall, the numbers have grown slower than the number of investors — something that also holds for other segments like investment advisors (IAs).

 

“…the number of IAs/RAs today is not commensurate with the large investor base and the ratio of investment adviser per million... is very low as compared to a jurisdiction such as the United States of America. This is leading to proliferation of unregistered entities acting as IAs and RAs… a much larger number of IAs/RAs is required,” said a Sebi consultation paper released in August 2024.

 

The worst was in 2022-23 when there was one RA for every 85,000 investors. The numbers have since improved but remain worse than they were before the pandemic.

 

The changing regulatory regime has created some uncertainty on the existing reach of research reports, according to a senior official of a brokerage. Much of the research is distributed to retail investors, often free of charge, by their brokerages. The recently released FAQs require clients to agree to terms and conditions before they can be provided these reports. There may be operational challenges in bringing clients on board and getting the documentation in place for consent because of the large number of people involved, said the brokerage official. This may limit brokerages’ ability to send these reports until there is certainty on the requirement.

 

“RAs shall ensure that neither any research service is rendered nor any fee is charged until consent is received from the client on the terms and conditions,” said Sebi’s August consultation paper.

 

“The research entity is required to ensure compliance with the requirement of disclosure of terms and conditions of research services to all such clients and to take their consent thereupon, except for clients who are institutional investors/QIBs for whom mere disclosure shall suffice and there shall be no requirement of seeking their consent to terms and conditions,” said the Sebi FAQs released on July 23.

 

An email sent to the regulator did not immediately elicit a reply.

 

“The move towards explicit consent for specific services is a growing trend globally to empower investors and ensure they are not subjected to unwanted or inappropriate information,” said Deven Choksey, managing director at DRChoksey FinServ. He added that tighter RA regulations have been seen in Europe and the US.