stock brokers & investment analysts

introduction

Stock exchanges are like market places where stockbrokers buy and sell securities for individuals or institutions. Stock prices fluctuate from minute to minute. The price of a stock at any given time is determined by the demand for it. Stock markets have gone through tremendous improvements to match the expectations of the growing industry. The introduction of norms for greater transparency in operations and the international trading and investments exposure as well as support of professional analysis have brought about tremendous improvements in this sector.

The Securities and Exchange Board of India oversees the operations of banks and financial institutions as a watchdog .The scams in the past decades have put tremendous pressure on its operations. Harshad Mehta’s acts have certainly created need for financial experts.

As the opportunities are many with a wide choice of organisations and jobs to choose from professionals in this sector can hope for a good future.

nature of work

Stockbrokers

The work of stock brokers has become a challenging one as it incorporates specialised knowledge as well as professional acumen. Stock market and related functioning has become computerised which obviously demands information management skills. Stock brokers commonly divide their operations between private clients and institutional work. Alternatively some brokers act only as dealers (client investment managers) while others are principally advisors (equity sales advisors). In large firms stock brokers deal with and advise smaller firms or work for both individual and institutional clients.

Securities sales representatives- The work of Securities brokers working on behalf of firms with private clients involves

Understanding the investment plans and objectives of the client (expectation for returns, interest in risk taking,)

Advising for investments

Carrying out market transactions

Today ail the transactions are carried out on computerised systems and deals are recorded for inspection at any time. Some brokers provide services for portfolio management and constantly review investments in the light of trends and developments in the market.

Securities traders- Stock brokers who work for institutional investments work as dealers and advisers and are often called securities traders. They are expected to give detailed statistical facts and figures.

Securities brokers- They are representatives of brokerage firms and execute orders to buy and sell securities.They are equipped with both knowledge and experience to advice on the sale and purchase of scripts and management of financial investments.

Securities analysts- Brokers may be required to advise on floatations of shares in conjunction with the merchant banking division.They are expected to have knowledge of the market to be able to anticipate certain trends. The actual or perceived strength of a company is a major factor in a stock purchase decision. Brokers are expected to make predictions.

Brokers specialise in a variety of financial services such as bond issues, handling institutional accounts, or mutual funds. They are employed by investment consultancies, broker firms, banks, insurance companies, pension funds, foundations, mutual funds and other financial institutions. The work in broker firms is concerning pre sales, sales and after sales services. These firms have departments to manage the sales and trading for the owners of securities, investment banking for firms and the government for the issue of securities, and capital markets which form an essential arm for trading activities.

Investment analysts

The Investment Analyst is comparatively hew on the scene. The increase in the number of institutions investing in shares and the competitiveness of the money management businesses has created the need for professionals equipped to work as investment analysts. They provide accurate information which investors and fund managers use.

There are two major roles investment analysts play - that of an institutional analyst and the stock broking analyst. They work with firms, which provide advice on buying and selling of shares and also those firms, which have funds to be managed. Fund managers in merchant banks, insurance and pension funds are involved with huge investments made by millions of investors. The funds are eventually disbursed as insurance claims, pensions etc. They as specialists are financial advisors who provide advise on the how and where concerning investment.

Most analysts have their own area of specialisation since the whole gamut of financial activities are too large to be covered by a single analyst. Specialisation may be as economic analyst, currencies or the industrial sector. The process of analysis involves making predictions of the company's future based on its past and present financial status. The study incorporates a comparative assessment of other firms in the sector under study. Investment analysts study the company's annual report, visit the organisation, conduct interview of senior executives to assess statistical information, profits, import and export figures for the industry as a whole. Institutional analysis involves studying the entire sector.

Equity analysts

The Indian investment sector has gone through tremendous changes. Stricter regulatory framework and transparency has generated professionalism in this industry. The complexity of the equity and bond market due to the advent of numerous financial instruments, institutionalising and the generation of a scientific approch in capital markets as well as the corning of Foreign Institutional Investors has ushered in scientific professionals on the scene. Equity research has become a high growth sector. Research reports of financial analysis are prepared by Equity analysts. Research has taken away the common practice of working on mere guesses regarding the rise and fall of stocks and shares.

Equity analysis involves continuous research. Field visits, interviews, analysis of fundamental and technical data, financial statement analysis, cash flow study esimating demand and supply and making profitability projections are the areas where equity analysts work.

Mutual Fund

The MF sector throws up tremendous career opportunities.

Marketing function- The marketing role involves investor education in recommending the right schemes and reducing the disparity between investor and fund goals. They evaluate the potential, evolve strategies for new schemes as well as schemes on the anvil. There is a growing inclination towards outsourcing the distribution of MFs to banks and non-banking financial intermediaries. This is a mutually beneficial route. Marketing entities are instrumental in disbursing the funds to their clientele while the investor has the familiarity factor reassuring his investment decisions. Distributors, appointed by the fund, contribute by educating the investor sufficiently. Individuals form the largest segment in the distribution category. Lead Managers co-ordinate with Intermediaries, campaign for the scheme and approach potential investors.

Investment Function- It comprises a fund manager, research & planning division, dealers, strategists and underwriters.

Fund manager- To a large extent, the success of any scheme depends on the calibre of the fund manager. Investment advisors who analyse the market and advise on the investment strategy it should adopt.

Research & Planning- This division provides valuable inputs to the fund manager, which forms the basis for their investment decisions.

In research an analyst could be (a) a general analyst and a stockpicker and (b) a specialist tracking a segment of business- IT, pharma, FMCG, etc.

Dealers- They execute trades and form a conduit between the investment team and the equity/debt markets. The dealer has to comply with all the formalities of sale and purchase. MF's need dealers for both equities and fixed income. He needs to be someone with a financial background, deep understanding of stock market operations and strong comunication skills.

Underwriters- Underwriters of a fund study the potential of the issue and public preference.

Operations department- Comprises fund operations and investor department - split up into the fund accounting group, the custody group, the financial control group and the MIS & audit group.

The fund accounting group calculates Net Asset Value of funds on a daily basis and "maintains books. The custody group liaisons with custodians appointed by the AMC. MFs buy and sell huge volumes of securities. The custodians appointed ensure the safe custody of these funds and ready availability.

Registrar and transfer agents process the applications and despatch Unit certificates to unit holders within the Security & Exchange Board of India specified time-frames.

Audit group handles customer queries.

work environment

Brokers work schedules are flexible.They work over time mainly to cope up with paper work during busy periods.Their work is sedentary requiring little physical effort. The atmosphere of a brokerage firm is highly charged and there can be considerable tension when the market shows volatility. The job requires ability to bear stress.

Investment analysts are usually a part of a team of specialists. They engage themselves in briefing brokers. Their work may require travel within the country or abroad.

personal characteristics

Since brokers deal with people they have to be well groomed, pleasant and must have tact and patience. A pursuasive and ambitious outlook and responsibility are required for the job. An analytical mind, logical thinking, imagination, ability to handle complicated problems, business acumen, ability to make projections are required.

Investment analysts must be able to derive interpretations from a vaste amount of information. Good verbal and written communication is important and a good memory is an asset. Making inferences as Well as getting to the root of real facts are the special skills required.

employment avenues

Employment options for stock brokers is with business houses, broking firms, investment banks as well as traditional banks which have business with broking firms.

With nearly 1,200 licenced stock brokers with NSE currently and the expected number to go upto 5,000 by 2005 and another 1000 with BSE and each broker entitled to 5 subbrokers and also the opening of new exchanges the business will swell in volume. Job options will be with regulatory bodies, financial institutions, foreign investors, financial planners, investment specialists, brokerage divisions in banks.

Research- Companies differ in the number of professionals they employ in the research department. Equity research can be a one man outfit or a department with a team of professionals drawn from diverse disciplines. Mutual funds, FHs, institutional investors, broking houses hire research specialists. Magazines and newspapers also offer opportunities for profes­sional commentary.

Earnings

The beginning salary is Rs 15,000 per month going up in the first few years. Some companies also offer profit sharing and stock option to employees.

study/training

Brokers need to have a graduate degree in commerce. For membership of the stock exchange they need to work with broking firms as trainees for a minimum of six months. The training period includes working in accounting, securities law, market study and analysis, portfolio analysis exchange rules, etc.A wide range of subjects are acceptable for potential investment analysts such as accountancy, economics, as well as subjects concerning specific areas such as mining engineering, geology, biotechnology, pharmacy etc because it gives analysts an opportunity tospecialise in investment in these sectors.

A background in finance, economics, taxation, accountancy (CA/CMA), or marketing is required for professional work in equity research.

In 1998 the Securities & Exchange Board of India (SEBI) specified certifications that every capital market employee has to take. The certifying authority is the National Stock exchange, which conducts online tests called NSE Certification in Finanacial Markets (NCFM) in 8 key financial areas. The test is of the objective type. The success rate is reported to be 50 %. The scores are valid for 3 years after which the test has to be passed again to remain in the profession. There is no eligibility criteria laid down for the test. The preparation can be made with assistance from accredited test centres. The following modules for study have been recommended: Derivatives for brokers / members and sales persons/ dealers in the derivative market; Capital Market Basic Funds for all stock brokers and employees of mutual banks, financial institutions etc.; NSDL Depository Operations for all depo-sitory participants; Surveillance in Stock Exchanges for surveillance staffof stock exchanges; AMFI- Mutual Funds for distributors and employees of mutual fund products; Capital Market (dealers) for dealers in capital market operations.

Post graduate programmes in capital markets is available with some universities and private institutes.

courses/institutions

There is limited training for professionals, the best known is a postgraduate diploma in Equity Research & Analysis and Post Graduate diploma in Financial Markets & Services (2 yrs} offered by the Institute of Chartered Financial Analysts, Hyderabad.

University of Mumbai offers Investment Analysis as a subject in BA and Diploma in Investment studies after MSc.

AMFI has introduced a programme of certification comprising training courses conducted by the UT1 Institute of Captial Markets, followed by a test conducted by the National Stock Exchange. Besides, brokers there are individuals appointed as agents for selling MF schemes.

MF research analysts usually have a financial background- MBA/CA/CFA-coupled with industry knowledge. The operations department is headed by CAs/MBAs with a finance background while graduation in any discipline is necessary at the entry level.

Other Courses

University of Mumbai, Fort, Mumbai - 400032

Course - Trading in Futures (Dip.)

University of Pune, Ganeshkhind, Pune- 411007

Course - Capital Marketing Management (Dip.)

Narsee Manjee Institute of Management Studies,

VL Mehta Road, Vile Parle (w)

Mumbai -400056

Course- Diploma in Financial Services & Investment Management and also Diploma in Investment Management.

Delhi University, Sukhdev College of Business studies,

Jhilmil Colony,

New Delhi - 1 10092 offers 3 years Bachelors in Finance and Investment Analysis for School Leavers. It is a course, which offers further study option for the stock markets.