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Want to earn Rs 5 million a year?

Larissa Fernand | April 24, 2006

I want to be a stock analyst," said a friend the other day.

When I asked him if he knew what the job entailed, he shrugged.

I probed and asked him why he picked on this profession. "Big bucks," was the quick retort.

Well, he certainly got that right!

Check this out.

Hewitt Associates, a global human resource services firm, recently released their findings of their 10th annual salary survey.

Their ninth survey revealed that salaried Indian employees earned salary increases ranging from 9.1% to 14.9%. The current survey which covered 2005, showed an average salary increase of between 11.4% and 15.4%.

What was interesting was that in 2004, the Information Technology industry in India offered the highest average salary increase of 14.9%. This year, it was asset management companies (mutual fund houses) at 17.1%. Do note, this being the average, some may have got even higher salary hikes.

In case that did not impress you, you must bear in mind the salaries in the finance sector are phenomenal. So a 17% would translate into a substantial amount.

Not convinced? Take a look. A senior position in a reputed financial services company could earn between Rs 60 lakh (Rs 6 million) to Rs 1 crore (Rs 10 million) per annum (both these figures are cost to company). This is what fund managers could be earning, as well as senior management in leading brokerage houses, investment banking firms and banks.

At the middle-management level, annual salaries could be in the broad range of Rs 25 lakh (Rs 2.5 million) to Rs 50 lakh (Rs 5 million), again both figures are cost to company.

Someone starting out could expect a cost to company pay packet in the Rs 8,00,000 to Rs 15 lakh (Rs 1.5 million) range.

With the lure of money being that strong, it is little wonder that there are umpteen college-goers who are determined to make a career in finance.

Here we tell you what employers look for when recruiting stock analysts.

Fitting the bill

When Sandip Sabharwal was studying chemical engineering in IIT-Delhi, his summer training stint was with a petrochemicals company. It left him "bored to death"; he decided this is not what he wanted to do with the rest of his life.

That took him to IIM-Bangalore for a degree in finance. A summer training stint at SBI Mutual Fund convinced him equity research was where he wanted to be. In 1995, he joined SBI Mutual Fund.

He started off as a research analyst before moving on to become a fund manager in 1999. After the phenomenal success of his funds at SBI Mutual Funds, he has now joined new fund house Lotus AMC as chief investment officer.

Passion, he says, is what you need the most if you want to become a stock analyst.

"The job is not just operational, in the sense you don't just follow a few sets of rules. One must be able to explore new options and spot new opportunities," he explains.

Take Sabharwal's own experience when he was heading research at SBI Mutual Fund.

After meeting with a number of auto companies in early 2002, he realised auto companies had undergone substantial restructuring over the previous five years and were seeing significant growth.

Sales growth combined with no capital expenditure (money utilised to buy or improve assets such as property, machinery,  equipment) and consistent cost cutting was a potent combination in an industry with a high operating leverage.

That is what led him to invest in Mahindra & Mahindra (at around Rs 100 per share) and Tata Motors (at Rs 75 per share). Today, Tata Motors is at around Rs 900 per share, while M&M is at around Rs 600 per share. 

"Stock picking is an attitudinal game; that is why you need to have the right mindset and thought process," says a fund manager.

It is not just ratios that you have to understand. You must be able to look beyond what you see. For instance, a good monsoon may translate into a good crop which would mean a high disposable income.

An analyst must be able to look into such a situation and decide which industry will benefit and why? Would it be soaps, shampoos, television and so on and so forth? One needs to look into the future and try to figure how consumers will behave.

Understanding ratios is essential but you will be expected to interpret the data and information presented to you. That is why an analytical ability is crucial.

Tridib Pathak, chief investment officer, Chola Mutual Fund, lays great emphasis on an investigative ability, an eagerness to know more and a hunger to obtain information.

"It is not sufficient for an analyst to just figure out that a company is doing well," he says. "You need to go beyond that and find out why that particular company is doing well while another in the same sector is not. What is this one doing right and what is the other one doing wrong?"

In a nutshell, one must have a genuine need to understand a business.

Sometimes, it is all work and no play

Picking the right stock is not an easy job. Sometimes, you may have to pore over coma-inducing spreadsheets. Other times, it will include a lot of travelling as you meet the management of firms and visit their factories and plants.

At still other times, you may have to trudge to a location in the suburbs (far away from your plush city centre office) just to chat with a few vendors.

It is hard work.

That is why you need to keep a long-term perspective in mind.

According to Sabharwal, it will take at least two to three years for an analyst to learn enough to make recommendations to his fund manager. So don't expect to be running portfolios within a month or two. Stay in for the long haul and work at it.

Being flexible

"The market is a humbling experience. At sometime or the other, it brings you to your knees," says another fund manager. "I walk into my office every morning," he continues "and ask myself, what could go wrong today?"

That speaks of the need of flexibility. If one is flexible, one is quick to realise mistakes, cut losses and move into areas earlier ignored.

Sabharwal agrees: "No matter how good we are or how good we get at fund management, we can never forget that the market is bigger than all of us."

He talks about having an open mind and being ready to take a chance. "There are new industries and new companies constantly on the rise. A few years ago, there may not have been many opportunities in infrastructure. But, today, it is a booming industry with so many stocks to look at."

Just because a sector was ignored yesterday does not mean the same applies today. Similarly, you might have made a wrong investment earlier, but that does not mean you rule out that sector or stock forever.

Getting the right education

A professional degree is a must; this means you need an MBA in finance from a well-known college.

The reason is simple. This educational background gives you a headstart. Sabharwal explains, "You get to understand return ratios and valuation of companies to a limited extent."

Tridib is even open about recruiting a chartered accountant. "Preferably a CA or an MBA," he says. "Their educational qualification would give them an analytical and financial mindset that would help later."

He himself is a chartered accountant who worked with IDBI (a financial institution into long-term project financing), CARE (a rating agency that rates the credit worthiness of a firm), UBS Securities and IDBI Principal as an equity research analyst before becoming the Chief Investment Officer at Chola Mutual Fund.

Some are of the opinion that, while an MBA is strong on forecasting, a CA's strength lies mainly in analysis.

A stock analyst at a leading brokerage firm says neither qualification weighs higher than the other. "Both will have similar academic skills and the person recruiting would look for writing skills and analytical skills, among other factors," he says.

"A CA may have more in-depth knowledge when it comes to analysing balance sheets but that does not mean an MBA cannot pick it up. An MBA will have a more holistic view and a broader perspective on business. Again, this is not something a CA cannot pick up."

But, do note, to get into a leading financial firm and earn the type of money that is mentioned at the start, you must graduate from a leading business school.

If you don't, you can still make a go at this career but in a smaller brokerage firm or financial outfit. Need I say, the money will be much less.

Job-hunting? Scout here

 




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Number of User Comments: 7




Sub: Want to earn Rs 5 million?

I would like to mention that you should also talk about ICWA's (Members of Cost and Works Accountants of India) who are as dynamic and ...


Posted by Atul





Sub: DUE ATTENTION IS NOT GIVEN

Hi, I was born on 29-09-1950 and is still very young and energitic. I consider myself capable of working more than any young man. I ...


Posted by DIPANKAR GUHA ROY





Sub: What about CFA

It is but surprsing that the writer has not named qualification such as CFA (by ICFAI, India) and CFA (USA) which in my opinion known ...


Posted by pks





Sub: stock analysis

The article was interesting in the sense that i feel that it indicated rightly the altitudes to be a good mutual fund analyst or manager. ...


Posted by yuresh





Sub: how about risk involved?

Not everything is good about working as stock analyst or investment banker. There is a huge amount of risk and uncertainity. And soemtimes, you may ...


Posted by Ajay




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