Research Analysts (RAs) who assign a rating or price target to securities must include a graph of daily closing prices in their research reports. This requirement ensures clients can see historical price performance in context. This article provides a comprehensive technical analysis of this requirement.
Regulatory Basis
Primary Provision: Regulation 20(3)
Regulation 20(3) provides that:
"If a research report contains either a rating or price target for subject company's securities and the research analyst or research entity has assigned a rating or price target to the securities for at least one year, such research report shall also provide the graph of daily closing price of such securities for the period assigned or for a three-year period, whichever is shorter."
When the Requirement Applies
Condition 1: Research Report Contains Rating or Price Target
The research report must contain:
- A rating (Buy, Sell, Hold, etc.); or
- A price target.
Condition 2: Assigned for at Least One Year
The RA must have assigned a rating or price target for at least one year.
Applicability Checklist
| Condition | Met? |
|---|---|
| Research report contains rating or price target | Yes/No |
| Rating or price target assigned for at least one year | Yes/No |
| If both conditions met | Graph required |
What the Graph Must Show
1. Type of Data
- Daily closing price of the securities.
- Not intra-day prices.
- Not weekly or monthly averages.
2. Period
The graph must cover:
- The period assigned (the time period of the rating or price target); or
- A three-year period.
- Whichever is shorter.
3. Format
- Must be a graph (visual representation).
- Must show daily closing prices.
- Must clearly label the axes and period.
Examples
Example 1: Rating Assigned for 1 Year
Scenario: An RA assigns a rating for 12 months to HDFC Bank.
Graph Requirement: The research report must include a graph of daily closing prices of HDFC Bank for:
- The period assigned (12 months); or
- Three years.
- Whichever is shorter (12 months).
Example 2: Rating Assigned for 2 Years
Scenario: An RA assigns a rating for 24 months to Reliance Industries.
Graph Requirement: The research report must include a graph of daily closing prices of Reliance Industries for:
- The period assigned (24 months); or
- Three years.
- Whichever is shorter (24 months).
Example 3: Rating Assigned for 4 Years
Scenario: An RA assigns a rating for 48 months to Infosys.
Graph Requirement: The research report must include a graph of daily closing prices of Infosys for:
- The period assigned (48 months); or
- Three years.
- Whichever is shorter (3 years = 36 months).
Practical Implementation
Sample Graph
Daily Closing Price: HDFC Bank (April 2025 - April 2026)
Price (₹) 2,000 | 1,800 | / 1,600 | / \ / 1,400 | / \ / 1,200 | / / 1,000 |/ 800 | / +---------------------> Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 2025 2026
Source: BSE
Implementing the Graph
Manual Implementation
- Collect daily closing price data.
- Determine the period to cover.
- Create a graph using charting software.
- Include the graph in the research report.
Automated Implementation
- Use charting software that automatically generates graphs.
- Set the period to the assigned period or three years.
- Embed the graph in the research report.
Common Compliance Gaps
1. Not Including Graph
Some RAs do not include the graph when required.
Solution: Include the graph in all research reports with ratings or price targets.
2. Using Incorrect Period
Some RAs use an incorrect period for the graph.
Solution: Determine the correct period using the assigned period or three years, whichever is shorter.
3. Using Incorrect Data
Some RAs use intra-day or weekly data instead of daily closing prices.
Solution: Use daily closing prices.
4. Not Updating Graph
Some RAs do not update the graph when the period changes.
Solution: Update the graph periodically to reflect the correct period.
Conclusion and How Anuj Desai & Associates Can Help
The price graph requirement ensures clients have historical price context for ratings and price targets.
Anuj Desai & Associates offers specialized services to help RAs comply with the price graph requirement:
- Review of research reports for graph inclusion.
- Guidance on graph creation and period calculation.
- Compliance audit and advisory.
Contact us today to ensure your price graphs comply with SEBI requirements. Our team will review your reports and provide a tailored compliance roadmap.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.