What is the role of FII and DII in the Indian Share market
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- Updated On:13-Dec-2021
- Replies:1
Short Answer
FII and DII are two influential participants in the Indian share market. FII are foreign investors who are not located in India whereas DII constitute domestic investors who are housed within India. These investors consist of Mutual Funds, Pension Funds, and other investors who determine the direction of the Indian stock market in the short term.
Detailed Answer
Who are FIIs and DIIs?
FIIs
‘Foreign Institutional Investors’ or FIIs are international investors who deploy their capital into the Indian capital markets. FIIs can be in the form of independent investors, hedge funds, mutual funds, or any other investment funds that are associated with our Indian stock markets.
These investors invest in the Indian equity and debt instruments but multiple regulations restrict them to a certain percentage of the total market capitalization. This is done to ensure that the markets are not shocked whenever FIIs decide to withdraw a sizeable chunk of money out, at the time of a crisis.
DIIs
Domestic Institutional Investors or DIIs are Indian institutional investors in the form of Mutual Fund houses, Banking institutions, Pension Funds, etc who invest in the domestic markets. The money that you invest through your mutual fund companies is also considered as DII investments. Therefore, Indian retail investors are also indirectly included under the DII category. Lately, with the increasing financial literacy and mass reach of the stock markets, the investments from the DIIs have grown multifold.
Role of these entities
In the Fiscal year 2020-2021, which was until March 2021, FIIs had invested a total of Rs 2.74 trillion or $37 billion in our Indian stocks markets. This kind of investment was the highest in the last 20 years.
The total DIIs investments were also at par with the FIIs, around Rs 20.4 lakh crore, in April 2020.
With such massive buying and selling power of these two bodies, the markets can be highly affected by them. Whenever the FIIs or DIIs purchase or dispose of a particular stock, it is typically with massive volumes. This can affect the stock positively or negatively.
How to benefit from them
FIIs and DIIs also have advanced research and analysis teams, which are responsible for picking the next best sector or security for investment. Therefore, if you are able to figure out the next target of these giants, you can benefit from investing in those companies.
The everyday buying and selling activity of the FIIs and DIIs is published by the NSE (National Stock Exchange), which can be gauged to determine the side they are on. FIIs buy and sell mostly for the short to medium term, whereas the DIIs typically invest slightly for the longer term. By analyzing the trend of FIIs and DIIs, we can paint a picture of the market condition and utilize it to our advantage.
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Discussion (0)
KRA is an abbreviated short form of KYC Registration Agency whose primary job is to collect and maintain KYC records of individuals on behalf of SEBI registered financial market participants mainly Mutual Funds companies, NBFC, Brokers etc.
Yes, foreign nationals are allowed to invest in the Indian stock market. Individuals can invest under the category of Qualified Foreign Investors, and Institutional investors can do so under the category of Foreign Institutional Investor (FII).
One97 Communications, the parent company of Paytm came up with the largest IPO in Indian history but failed to perform well. Firstly the IPO was too big for the retail investors to digest. Then the valuations were extremely high which led to the HNIs and Institutions avoiding the issue. All together the overhype in social media led to massive losses for the retail investors as the stock fell almost 40% in two trading sessions.
Contrary to popular belief, India has more stock exchanges than only the two most well-known, the NSE and BSE. There is no denying that these two stock exchanges dominate the Indian market, but according to SEBI, there are currently seven recognised stock exchanges in India.
Zerodha as well as Groww, both allow investors to invest in Mutual funds. Groww does not charge any Account opening fees or Annual maintenance Charges but Zerodha charges Rs 200 for Account opening and Rs 300 for AMC. This makes Groww a cheaper and better option when it comes to investing in mutual funds.
You can definitely trade or invest Rs 100 in Indian stock markets. There are no monetary requirements to enter the stock market hence you can buy any share that is trading under Rs 100. Apart from direct stock investing/ trading, there are some indirect ways to own shares over Rs 100. This can be done through Mutual Funds.
Yes, a foreigner can invest in India only thorough government-regulated channels. Let's learn about some of the investment alternatives.
A KRA is mandated to collect and maintain KYC records of investors on behalf of financial market participants registered with SEBI. Computer Age Management System (CAMS) is a registered entity with the SEBI was setup in 1993 as a registrar to Mutual Fund companies and now serves almost close to 60 percent of the industry. Foreign Account Tax Compliance Act is an agreement between India and United states to achieve greater tax compliance between both countries.
Yes, foreign nationals can invest in Indian mutual funds. They can either invest by direct route, which requires them to open a demat account, or by indirect route through Unit Confirmation Receipts (UCR).
The Mirae Asset NYSE FANG Plus ETF Fund is a good option for Investors who want foreign exposure. The Equity allocation is very concentrated to just 10 stocks which makes this ETF very volatile and risky. This ETF consists of the top 10 stocks in their respective sectors mostly TECH, like Amazon, Netflix. Facebook, etc. Hence Investors with high-risk tolerance and a long time period should consider this fund.