Are you a trader or investor who wants to know what is FII and DII in the stock market? Don't worry, you are not alone. It is a very common question among traders and investors. This article explains you everything about FII's and DII's.
Individual investors like us who invest in stock market are known as retail investors. The major activity in the stock market is dominated by institutional investors. Retail investors only make up a small portion of the stock market.
Let's first understand who are Institutional Investors.
What Is an Institutional Investor?
An institutional investor is a company or organization that invests money on behalf of other people. Mutual funds, pensions, and insurance companies are examples.
Institutional investors often buy and sell substantial blocks of stocks, bonds, or other securities and, for that reason, are considered to be the whales on Wall Street.
Different Types of Institutional Investor
Mutual Funds are most popular Institutional Investor. It's an investment scheme which pools money from many investors and invests on behalf of those investors. Mutual Funds make money for the investors just by investing the money it receives from many other people.
Hedge funds are another type of institutional investors. It invests money in keeping with market values. In respect to mutual funds, it is also a kind of institutional investor.
However, hedge funds are more focused on investment strategies and high performance. It pays out a lot of money to investors compared with other institutional investor.
Pension funds are also popular investors. They invest their clients' retirement benefits. Both institutional investors are considering to be the biggest components in the market. Institutional investors play a very important role in stabilizing the stock market.
Insurance companies are another type of institutional investor. It is also a kind of institutional investors as it invests people's premium money. They also invest on behalf of their clients and make money out of it. One key difference between insurance companies and other institutional investors is that they rarely charge their clients any management fees or commissions, relying instead on investment returns to pay for services rendered.
Now let's understand the FII's and DII's.
What is FII?
FII's (Foreign Institutional Investors) are investors or investment funds from outside of India investing in the India's financial instruments and stocks. FII's are considered good for the Indian market and help in boosting up the market price of shares.
What is DII?
DII's (Domestic Institutional Investors) are from India investing in the financial instruments and stocks. DII's would usually be all institutional investors from India, such as mutual funds & insurance companies, that invest money for their customers who are retail investors or institutions.
Example of DII and FII
Major foreign institutional investors in India are Europacific Growth Fund, the Government of Singapore, and Black Rose, etc. These are all popular FIIs that trade regularly.
Mutual funds, banking & financial institutions, and pension funds are examples of DII's (Domestic Institutional Investors).
How do FII and DII work?
FII and DII have superb research staffs and are certified with SEBI. People prefer FII investment more because of their research.
The FII and DII are institutions that invest in various securities. The amount they invest is huge. It is evident that FIIs have more influence than DIIs.
FIIs and DIIs investors are referred to as market movers because their buying and selling volumes affect the market.
How To Read FII and DII Data?
You can read the FII and DII data by reading their Buy Value and Sell Value. However, the more significant event is to see that long positions are increasing or decreasing. They will provide future predictions to you about the direction of the stock market.
FII’s and DII's investing in a company gives us a good indication of how the stock will perform in the future.
To read the FII and DII data you can check it on NSE India website.
Difference between FII vs DII
Foreign Institutional Investor
Domestic Institutional Investor
Short to Medium term
FIIs react on news
DIIs react on major facts
No such restrictions
Both of them are important for investors who want to learn more about the stock market. Hence, Investors should do their own research after reading the FII and DII data before making any investments.