What are FIIs and DIIs? How do they affect the stock market?

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FIIs (Foreign Institutional Investors) are like your favorite foreign relative who always gives you gifts from abroad in exchange for two nights in your room when they stay in India. DIIs (Domestic Institutional Investors) are like your Indian parents giving you gifts made in India.

Remember when there were recent reports of FIIs pulling their money out of India and how it was blamed for the drop in the value of the Rupee? Or do you remember reading or listening to headlines that sound like ‘FII pumped money and stocks rebounded to….’

So what are FIIs and DIIs and why do people love it when FIIs pump money into our stock market? Also, why does the world look like it is falling apart when IFIs take their money out of the system?

What are FIIs? Many foreign institutions that have headquarters outside India – like foreign banks, foreign mutual funds, foreign governments, foreign insurance companies, and many more, are always looking to grow their money by investing in certain fast growing projects, companies or countries.

When a country (like India) grows and develops in terms of infrastructure and production and seems to have immense potential for growth, it attracts the attention of these IFIs. Since developing economies have greater growth potential and offer better returns than developed and mature economies, foreign institutions may decide to invest their foreign currencies in developing countries through the stock market. This helps foreign investors get better returns after the project is completed and sometimes get tax benefits on their investments.

In India, some of the largest and most popular Foreign Institutional Investors (FIIs) are:

  • Europe-Pacific Growth Fund
  • Singapore Government
  • Abu Dhabi Investment Authority
  • JP Morgan
  • Blackrock DSP
  • Franklin Templeton Investment Funds

Think of FIIs as close family friends or relatives who stay abroad and bring gifts for you and your whole family when they visit India. They wish you luck, encourage you, and often give you more pocket money than your Indian parents because they’re awesome and can afford it, and they don’t mind giving you more. You return the favor by sacrificing your room to their family and welcoming them in any way possible, whenever they are here. They love you even more since they get a nice room for free.

What are IIDs? India-based Domestic Institutional Investors or DIIs are institutions registered in India that invest in the Indian stock market. This includes Indian banks, mutual funds, Indian government investments, insurance companies, etc. Since they hold larger funds from a large number of investors in the country, they can generally invest larger amounts in different companies and can generate a greater effect on a company’s growth.

What is the impact of FIIs and DIIs on the stock market? FIIs and DIIs typically account for around 35% of Indian stock market activity and heavily influence the stock markets. When an FII or DII invests in a company, it usually gives confidence to a large number of retail and individual investors. FII investment also increases a country’s foreign exchange reserves, which enables the government and the RBI to undertake monetary operations.

How do I find a DII/FII equity investment?

  1. Connect to this site: https://ticker.finology.in/
  2. Suppose you want to find the stake in Tata Steel. Enter the stock name into the search engine.
  3. Click on “Participation”

4. Check the ”Share holding pattern”

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