Indicator 10- FII & DII Activities

Welcome to yet another article regarding advanced option trading strategies. As we had discussed in our previous article about the impact of global news. How global news is going to affect the Indian stock market mainly that of the USA economy. Now, in this article, we are going to learn about the FII and DII activities.

FII’ known as ‘foreign institutional investor,’ and refers to an investment fund house or an investor who puts their money into a country’s assets while being headquartered in the other country. In India, this is a commonly used term to refer to outside organizations contributing to the country’s financial markets by investing in the stock market. On the other hand, ‘DII’ is known as ‘domestic institutional investors.’ Unlike FIIs, DIIs are investors that invest in the financial assets and securities of the country they are currently living in.


These investment decisions of both FIIs and DIIs are changed by the political and economic trends of the company. Additionally, both types of investors — foreign institutional investors (FIIs) and domestic institutional investors (DIIs) — can change the economy’s net investment flows.


So, a foreign institutional investor (FII) is an investor or investment funds house investing in a country outside of the one in which it is headquartered. The term foreign institutional investor is possibly most commonly used in India, where it refers to outside institutions investing in the nation's financial markets. The term is also known as officially in China.


FIIs can incorporate hedge funds, insurance companies, pension funds houses, big investment banks, and mutual funds. FIIs can be important sources of capital in the growing economies, yet many developing nations, such as India, have put limits on the total value of assets an FII can buy and the number of equities shares it can buy, especially in a single company. This helps limit the effect of FIIs on individual companies and the nation's financial markets and the potential damage that might occur if FIIs flew away during a crisis.


Some of the countries with the biggest number of foreign institutional investments are those with developing economies, which generally give investors higher growth chances than the full economy. This is one reason FIIs are mainly found in India, which has a high-widening economy and pretty individual corporations to invest in. It is necessary for all FIIs in India must register with the SEBI to participate in the stock market.

Domestic institutional investors are those institutional investors who handle investments in securities and other financial underlying assets of the country they are based in. Institutional investment is known to be the investment done by the institutions or organizations such as big banks, insurance companies, mutual fund houses, etc. in the financial or real underlying assets of a country.


In simple terms, domestic institutional investors use large funds to trade in securities and assets of their country. These investment decisions are determined by various domestic economic as well as political points of view. In addition to the foreign institutional investors, the domestic institutional investors also determine the net investment flows of the money into the economy.


DII is known as ‘domestic institutional investors.’ DIIs are a special class of investors that take on to invest in financial assets and securities of the country they are currently living in. These investment decisions of DIIs are changed from both political and economic points of view. Similar to foreign institutional investors (FIIs), domestic institutional investors (DIIs) can also change the economy’s net investment flows of money. In India, domestic institutional investors have quite a critical role when it comes to the performance of the Indian stock market, especially when foreign institutional investors are the county’s net sellers of the underlying assets.


Some of the types of DIIs like mutual funds, insurance companies are given in the next point. Mutual funds invest a large number of investments of shareholders in a range of securities which changes with the goal of the mutual fund. There is a broad range of fund types that are available for buy which hang on both the risk appetite and needs of the investor.

In India, mutual funds are a significant investment option for beginners, intermediate and expert investors due to their flexibility and diversify a portfolio. Investors can pick and choose their funds based on their risk appetite and wealth creation goals, and consistently indirectly become domestic institutional investors by contributing to Indian mutual fund’s investments.


The next type of domestic institutional investor in India is all India-form and Indian-owned insurance companies. Insurance companies offer their customers a range of insurance options from life insurance, term insurance, health insurance, retirement options, and many more. Depending upon the source of what the company gives to its customers, one can usually also fixed loans and other types of financial instruments such as ULIPs from Indian insurance companies. Insurance companies are a Huge contributor to the overall DII equity holdings.


So, in conclusion, let's understand in simple terms. FIIs are companies that invest in India but are don’t living in India i.e., they are companies that are not built-in in India.


FIIs can be any Hedge Fund house, Mutual Fund house, Pension Fund, big Insurance companies from either the U.S.A. or any country in the world. FIIs are one of the most significant organizations in our Indian Stock Market because they invest in developing economies because of a great widening opportunity. Some of the examples of FIIs are Morgan Stanley, J.P. Morgan, Goldman Sachs, etc.


Now, the DIIs are big Indian companies that invest in our stock market in a large amount of money for good returns and they are generally Insurance Companies, Mutual Funds, Liquid Funds, etc. One of the most important companies is LIC Ltd. (Life Insurance Company Ltd.).

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