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NISM Certifications · NISM-Series-XV: Research Analyst · Qualities of a Good Research Report

A report on Sundaram Auto Parts states: current price ₹240, target price ₹300, and a bear-case value of ₹180. The report recommends 'Buy' and says the downside risk is limited. Based on these figures, which critique best reflects good report quality?

The claim is weakly supported because upside to ₹300 is 25% while the bear case of ₹180 implies a 25% downside, giving symmetric risk-reward. A good report must keep its wording consistent with its own numbers and justify any statement of limited downside.

  1. AThe statement is consistent because upside is 25%, which is greater than any downside
  2. BThe statement is weakly supported: upside is 25% (₹60) while bear-case downside is 25% (₹60), so the risk-reward is symmetric and 'limited downside' needs justificationCorrect
  3. CThe statement is correct because bear-case values are never relevant
  4. DThe statement is inconsistent because the target price must equal the bear-case value

Explanation

Upside = (300−240)/240 = 25%. Downside = (240−180)/240 = 25%. Equal upside and downside means a symmetric risk-reward, so claiming limited downside is unsupported unless probabilities or other reasons are given. A good report keeps conclusions consistent with its own numbers.

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