I can assure you life as an equity analyst is not easy. It was not easy in the 1980s when I was starting life and it is not easy now. The kind of expectation that we put on an analyst to give a call is not funny. I am talking of both the sell side analyst and the buy side analyst. Let us look at the life of a sell side analyst. He has to be an entrepreneur to start with. Starting salaries are not too great, but still we expect a lot from him. The client sometimes says “I want to buy Himachal Futuristic – tell me more about that”. Bias. Ha!

Let us see what all we expect an equity analyst to do:

We expect him/her to constantly scan the universe of about say 1000 stocks and find a good share to research. Given Indian conditions this is not just difficult it is almost impossible because our data tools are not so great, but hey they are getting there. Yes we would like more accuracy especially from the international ones, but things have come a long way from the ’80s when we used to lose a couple of days in just calculating the ratios and creating the fund flow statement.

He then has to be a rudimentary (at least) business analyst who can understand the business. The good thing is that the fund managers too have started on this route and they do (in most cases) understand the difficult part of being a business analyst at age 24. It is not easy even if you are armed with an engineering degree, accounting degrees and / or an MBA. The experience that is required to be a good business analyst is ignored even when we ask the analyst to play this role. Anyway it is tough to be an analyst in a brokerage house and expect to get respect and be credible in the eyes of a fund manager of a fund house.

To be a business analyst he needs to understand the business – cement, auto, software, entertainment, power, oil, biotech, and this is not easy. To be able to understand even a company like Tata Power is difficult – each plant has a different reason to be profitable or otherwise. Imagine asking a kid to ‘understand’ the oil INDUSTRY. Every industry has its suppliers, vendors, economics, ..so this is really difficult and we expect this from the analyst.

Then cut to meeting the management. If they talk to you nicely at the end of 5 meetings, boy you have missed the 800 pound guerrilla lurking around you!! Well how do you expect a 24 year old to know that? So asking the right questions (no I do not have them in a pdf file) and getting the right answers is not very easy, and it cannot happen without adequate training and mock sessions (hey who ever heard of training a research analyst?). Now you have to meet them, ask them questions, probe them, and come to the right conclusion. Of course being a cynic helps, but does not take you far!!

Then he has to spend about 2 days on the printed balance sheet and know as much as the CFO of the company. The accountant and the CFO, spend about 365 days on the balance sheet. So our Sherlock Holmes having judged the accountant and cfo in the management meet has to audit / investigate the 430 page balance sheet and come to some dramatic conclusion that 112 analysts before him could not do. He is not as empowered as the auditor (or even better, the ITO) but quickly he has to come to the right conclusions. Normally this happens in a very different way. The analyst calls up another analyst and asks “kya lagta hai” (what is your view??)! I do not blame the analyst at all. My sympathies.

Having done all this he has to come up with a rating (aka joking) and a target price (so now our kid has become a technical analyst too!). If you think all this is easy, think again.

You think it is over? No. Once this kid has used all the above tools, he thinks he can go and get some rest. Exactly then, the head of sales calls him and says “Remember that Tata Steel buy call you gave when it was Rs. 383? My client Mr. Pandurang bought it..and is still cursing you!! However his daughter is happy with your Ashok Leyland call at 22..she just sold it for Rs. 98….

So if you want to be an equity analyst, think again.