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NISM Series XV: Research Analyst Exam Prep
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NISM Series XV: Research Analyst Exam Prep

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NISM provides professional education, certifications, training, and research in financial markets.

True

What is the main objective of the NISM-Series-XV: Research Analyst Certification Examination?

To create a common minimum knowledge benchmark for research analysts.

What is the passing score for the NISM-Series-XV certification examination?

  • 60 marks (correct)
  • 55 marks
  • 70 marks
  • 65 marks

    • The examination consists of ___ multiple choice questions and ___ case-based questions.

    <p>92, 2</p> Signup and view all the answers

    What are the two main approaches to fundamental research mentioned in the document?

    <p>Top down and bottom up.</p> Signup and view all the answers

    Which of the following is NOT covered in the workbook for the research analyst certification examination?

    <p>Corporate finance strategy</p> Signup and view all the answers

    What will happen if a candidate selects an incorrect answer in the examination?

    <p>There will be negative marking of 25% of the marks assigned to the question.</p> Signup and view all the answers

    To register for the examination, candidates should visit ___ .

    <p><a href="http://www.nism.ac.in">www.nism.ac.in</a></p> Signup and view all the answers

    What is the role of a Research Analyst?

    <p>RAs help their clients take informed decisions</p> Signup and view all the answers

    Analysis and Decision making are affected by which of the following factors?

    <p>All of the above</p> Signup and view all the answers

    Sell-side Analysts generally work for money managers like mutual funds, hedge funds, portfolio managers who purchase and sell securities for their own investment accounts or on behalf of their clients.

    <p>False</p> Signup and view all the answers

    Which of these qualities are desired in a good Research Analyst?

    <p>All of the above</p> Signup and view all the answers

    What types of data do Research Analysts collect?

    <p>Economic, industry-specific, and company-specific information.</p> Signup and view all the answers

    What are the three main categories of Research Analysts?

    <p>Sell-side Analysts, Buy-side Analysts, Independent Research Analysts.</p> Signup and view all the answers

    Different industries face different challenges and opportunities due to their own specific ___.

    <p>growth drivers</p> Signup and view all the answers

    What is a fundamental quality of a good Research Analyst?

    <p>Good communication skills, both written and verbal.</p> Signup and view all the answers

    What is the primary role of a Research Analyst?

    <p>To analyze security and investment opportunities to provide insights for decision-making.</p> Signup and view all the answers

    What are the primary responsibilities of a Research Analyst?

    <p>Conducting research, analyzing data, providing investment recommendations, and preparing reports.</p> Signup and view all the answers

    What are the important qualities of a Research Analyst?

    <p>Analytical skills, communication skills, attention to detail, and integrity.</p> Signup and view all the answers

    What is a securities market?

    <p>A marketplace for buying and selling financial instruments like stocks and bonds.</p> Signup and view all the answers

    What are the types of bonds?

    <p>Government bonds, corporate bonds, municipal bonds, and convertible bonds.</p> Signup and view all the answers

    What does technical analysis involve?

    <p>Analyzing price and volume data to forecast future price movements.</p> Signup and view all the answers

    What is a SWOT analysis?

    <p>An evaluation of strengths, weaknesses, opportunities, and threats of a business.</p> Signup and view all the answers

    What is the purpose of financial statement analysis?

    <p>To assess a company's financial performance and position.</p> Signup and view all the answers

    What is the role of industry analysis in fundamental research?

    <p>To understand industry trends and competitive dynamics that affect investments.</p> Signup and view all the answers

    What factors are considered in economic analysis?

    <p>Microeconomic and macroeconomic principles, as well as various economic variables.</p> Signup and view all the answers

    What is the importance of the regulatory environment in financial markets?

    <p>To ensure transparency, fairness, and compliance in trading and investing activities.</p> Signup and view all the answers

    Which of the following are considered securities?

    <p>Debentures</p> Signup and view all the answers

    What is the role of SEBI in the Indian securities market?

    <p>Regulator of securities and stock market activities.</p> Signup and view all the answers

    Equity shareholders do not bear the risk of ownership.

    <p>False</p> Signup and view all the answers

    What type of debentures are fully convertible into ordinary shares?

    <p>Fully Convertible Debentures</p> Signup and view all the answers

    What are preference shares?

    <p>A type of equity share with preference over common equity in dividends and capital repayment.</p> Signup and view all the answers

    What do Electronic Gold Receipts represent?

    <p>Physical gold held</p> Signup and view all the answers

    Match the following types of bonds with their characteristics:

    <p>Foreign Currency Bonds = Issued in a currency different from the home country External Bonds = Issued in a different currency than the country of issue Masala Bonds = Issued outside India but denominated in Indian Rupees Debentures = Instruments for raising long-term debt</p> Signup and view all the answers

    Units issued by mutual funds are known as ______.

    <p>NAV (Net Asset Value)</p> Signup and view all the answers

    Convertible debentures can be converted into equity shares at a future date.

    <p>True</p> Signup and view all the answers

    What type of depositary receipts are issued and traded in the Indian market by a non-Indian company?

    <p>Indian Depository Receipts (IDRs)</p> Signup and view all the answers

    Which Indian companies have issued ADRs?

    <p>Infosys, Wipro, ICICI Bank, HDFC Bank</p> Signup and view all the answers

    Investors holding DRs have voting rights.

    <p>False</p> Signup and view all the answers

    What are Foreign Currency Convertible Bonds (FCCBs)?

    <p>They are foreign currency denominated convertible debt papers issued by companies in international markets.</p> Signup and view all the answers

    Equity Linked Debentures (ELDs) are based on the returns of the underlying ______ assets.

    <p>equity</p> Signup and view all the answers

    Commodity Linked Debentures (CLDs) are linked to the returns of underlying equity assets.

    <p>False</p> Signup and view all the answers

    What percentage of assets must REITs hold in revenue generating real estate?

    <p>80%</p> Signup and view all the answers

    What are Mortgage Backed Securities (MBS)?

    <p>Debt instruments issued against home loans and other receivables.</p> Signup and view all the answers

    Managed futures contracts are a portfolio of futures contracts that are actively ______ by professionals.

    <p>managed</p> Signup and view all the answers

    What is the main purpose of an Initial Public Offer (IPO)?

    <p>To raise equity capital for further growth of the business.</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Public Issue = Securities issued to the public at large. Private Placement = Issuing shares to a select group of investors. Follow on Public Offer = Fresh issue of securities by already listed companies. Rights Issue = Offering existing shareholders the opportunity to buy more securities.</p> Signup and view all the answers

    What promotes the growth of the primary market and capital formation?

    <p>An active secondary market</p> Signup and view all the answers

    In the primary market, issuers do not have direct contact with investors.

    <p>False</p> Signup and view all the answers

    Which market allows trades to be directly negotiated between counterparties?

    <p>Over-The-Counter Market</p> Signup and view all the answers

    What is the formal contract to buy or sell securities known as?

    <p>Trading</p> Signup and view all the answers

    The entity through which the settlement of securities takes place for trades done on stock exchanges is called the ______.

    <p>clearing corporation</p> Signup and view all the answers

    What type of margin is calculated based on the concept of 'Value At Risk'?

    <p>Initial margin</p> Signup and view all the answers

    Which of the following is a type of depository in India?

    <p>Central Depository Services Limited</p> Signup and view all the answers

    What are the entities that facilitate buy and sell transactions of investors on stock exchanges called?

    <p>Trading members or stock brokers</p> Signup and view all the answers

    Clearing banks maintain accounts for clearing members.

    <p>True</p> Signup and view all the answers

    The formal process through which funds and securities are exchanged is known as ______.

    <p>clearing and settlement</p> Signup and view all the answers

    What do underwriters provide in the primary market?

    <p>Comfort of purchase for issuers</p> Signup and view all the answers

    What is the main purpose of a custodian?

    <p>To hold and safeguard funds and securities</p> Signup and view all the answers

    What is the role of investment advisers?

    <p>To assist investors with asset allocation and investment choices</p> Signup and view all the answers

    Study Notes

    NISM-Series-XV: Research Analyst Workbook Overview

    • Developed for candidates preparing for the NISM Certification Examination for Research Analysts.
    • Focus on high-end professional education, financial literacy, and enhancing governance standards in securities markets.

    NISM's Role and Certifications

    • Engages with financial regulators to provide education in the financial services sector.
    • Offers a range of certifications covering various sectors, including Equities, Mutual Funds, and Derivatives.
    • Over 1.7 million certificates issued as of March 2023, emphasizing the widespread impact of NISM certifications.

    Workbook Structure and Content

    • Comprehensive workbook covering essential topics for equity research.
    • Includes basics of Indian securities markets, equity and debt terminologies, fundamental research approaches, economic analysis, and company analysis techniques.
    • Also addresses valuation principles, corporate actions, and writing effective research reports.

    Research Analyst Certification Examination

    • Aims to create a common knowledge benchmark under SEBI (Research Analyst) Regulations, 2014.
    • Candidates need to pass to validate their experience as research analysts and their involvement in publishing research reports.

    Examination Objectives

    • Understand Indian securities markets and related terminologies.
    • Learn top-down and bottom-up approaches in fundamental research.
    • Gain knowledge on micro and macro-economic analysis, including key variables influencing analysis.

    Assessment Structure

    • Comprises 92 multiple choice questions (MCQs), each worth 1 mark, plus 2 case studies (8 total marks).
    • Total assessment is 100 marks with a passing score of 60.
    • Negative marking policy: 25% off for each incorrect answer.

    Registration and Preparation

    • Candidates can register for the examination through the NISM website.
    • Familiarity with Excel or OpenOffice Calc is essential for numerical aspects of the exam.

    Key Components of Research

    • Importance of understanding industry analysis, company business models, and macroeconomic factors.
    • Evaluation of company strengths, weaknesses, opportunities, and threats (SWOT analysis).
    • Emphasis on ethical standards and quality control in research reporting.

    Disclaimer and Limitation

    • The content serves general educational purposes and does not guarantee outcomes in the examination.
    • Users should seek professional advice and consider their circumstances before acting on information in the workbook.### Research Analyst Profession
    • Research Analysts (RAs) help clients make informed investment decisions by gathering and analyzing relevant data.
    • Their work involves both qualitative and quantitative assessments, focusing on macroeconomic factors, industry trends, and specific company performance.
    • Types of analysts include:
      • Sell-side Analysts: Publish public research reports, provide buy/hold/sell recommendations, and work for investment firms.
      • Buy-side Analysts: Operate within asset management companies and generate internal research for their funds.
      • Independent Research Analysts: Work for boutique firms, offering customized research for various clients.

    Primary Responsibilities of a Research Analyst

    • Research Analysts evaluate industries and companies by examining various growth factors and economic conditions.
    • They focus on understanding:
      • Economic Indicators: National income, inflation, interest rates, unemployment, fiscal and monetary policies, FDI, and global market influences.
      • Industry Dynamics: Regulatory frameworks, business models, competitive landscape, and consumer behavior.
      • Company Performance: Analyzing qualitative aspects (management effectiveness and business model) and quantitative aspects (financial statements and cash flow).

    Principles of Interaction with Companies/Clients

    • Effective communication is essential; personal interactions provide deeper insights beyond public information.
    • Analysts must prepare for meetings by conducting thorough pre-meeting research on the company and its market environment.
    • Key interaction principles include:
      • Independence: Maintain an unbiased perspective and ensure analysis is based on factual data.
      • Networking: Utilize connections within the industry to gather additional insights.
      • Clarity of Questions: Prepare specific questions in advance to maximize the utility of interactions with management.

    Economic Analysis Focus Areas

    • Analysts investigate key macroeconomic factors which shape a company’s operating environment, including government policies and investment trends.
    • Understanding the broader economic landscape is vital for consistent and accurate company evaluations.

    Industry and Company Analysis

    • RAs must dissect various industries to grasp the unique challenges and opportunities that define them.
    • A comprehension of both qualitative insights and quantitative measures help RAs evaluate the viability and growth prospects of companies within those industries.

    Communication and Reporting

    • After conducting research, analysts must effectively communicate their findings and recommendations to clients, ensuring clarity and alignment with client expectations.
    • Maintaining a rigorous approach to client communication enhances trust in the research process and outcomes.### Role of Research Analyst (RA)
    • RAs provide realistic company suggestions to clients based on data, avoiding bias or overly optimistic/pessimistic views.
    • Communication should be simple, clear, and concise, particularly in written research reports.
    • Any potential conflict of interest, like shareholding in the subject company, must be disclosed prior to providing recommendations.
    • Research reports should clearly state any assumptions made and avoid or explain jargon and abbreviations.
    • RAs must collect and interpret reliable data to create actionable recommendations for clients.
    • Sincerity, honesty, and adherence to regulatory guidelines (e.g., SEBI) are essential in their conduct.
    • Technology, such as recording devices for interviews, can be utilized with appropriate consent.

    Important Qualities of a Research Analyst

    • Strong quantitative and qualitative analytical skills are required; comfort with numbers is essential.
    • Methodical approach and the ability to discern relevant information from various sources.
    • Understanding business models and competitive dynamics is crucial for insightful analysis.
    • Desired qualities include proficiency in numerical analysis, clarity in financial concepts, and effective communication skills.
    • Ability to read and comprehend financial statements and reports is vital.
    • Attention to detail and the ability to ask relevant, probing questions are important traits.

    Introduction to Securities Market

    • Securities are transferable financial instruments that represent ownership or indebtedness, such as stocks, bonds, and debentures.
    • They are issued by companies, governments, or financial institutions and are means for raising capital while allowing investors to earn returns.
    • Securities markets facilitate liquidity, enabling easy buying and selling of financial assets.
    • The market structure includes investors, borrowers, intermediaries, and regulatory bodies.

    Definition of Securities

    • As per the Securities Contracts (Regulation) Act, 1956, securities include:
      • Shares, stocks, bonds, debentures, derivatives, and mutual fund units.
      • Securities must not include insurance policies or similar instruments that provide a combined risk-benefit.
    • Ownership of securities allows investors to convert savings into investment assets, while facilitating issuers in capital raising.

    Financial Market Overview

    • Comprises:
      • Investors purchasing securities.
      • Borrowers selling securities to raise funds.
      • Intermediaries that facilitate transactions.
      • Regulatory bodies that ensure orderly market operation.

    Types of Financial Products in Securities Market

    • Equity Shares: Representation of ownership in a company, issued through direct issuance and stock exchanges.
    • Debentures/Bonds/Notes: Debt instruments for long-term financing, subject to regulatory oversight by RBI and SEBI.
    • Foreign Currency Bonds: Issued in currencies different from the issuer's home currency, involves foreign exchange risk.
    • External/Masala Bonds: Euro bonds issued in a currency not within the issuing country, with Masala bonds specifically denominated in Indian Rupees.
    • Warrants: Options allowing investors to purchase shares at a predetermined price after a specified period.

    Market Indices

    • Market indices track the performance of specified shares, weighted by market capitalization.
    • Major indices in India include Nifty 50, S&P BSE Sensex, and SX40, indicating market performance and sentiments.
    • Indices serve as benchmarks for comparing investment returns and assessing economic performance.

    Mutual Funds and ETFs

    • Mutual Funds (MFs): Pool investors' funds to invest in diverse securities, regulated by SEBI, with increasingly fluctuating NAV.
    • Exchange Traded Funds (ETFs): Similar to mutual funds but traded like stocks on an exchange, reflecting changes in asset prices in real-time.

    Preference Shares and Structures

    • Preference Shares: Equity shares that yield dividends and have priority over common shares in dividends and liquidation, without voting rights.
    • Convertible Debentures: Debt instruments that can be converted into equity shares, with types like fully, partly, and optionally convertible debentures.

    Additional Terminology

    • Understanding of terminology related to securities and financial instruments is critical for navigating the investment landscape and making informed decisions.

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    Prepare for the NISM-Series-XV Research Analyst Certification Examination with this comprehensive workbook. This resource is designed to assist candidates in mastering the necessary concepts and skills to excel in the exam. Dive into essential topics and practice for success.

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