KEY TAKEAWAYS
- FII (foreign institutional investor) holdings have dropped to 17.22%, marking a 12‑year low.
- DII (domestic institutional investor) holdings have climbed to 10.35% in mutual funds alone, helping push total domestic institutional ownership above FII levels.
- As a result, the FII:DII ownership ratio has fallen below 1—specifically to 0.98, highlighting stronger domestic influence in Indian markets
Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) are key players in the financial markets, particularly in countries like India. FIIs refer to investors or investment funds based outside a country that invest in its financial assets. In contrast, DIIs are investors residing within the country who allocate funds to local securities and financial instruments.
Both FIIs and DIIs significantly impact market trends and capital flow. Their investment choices are often influenced by political stability, economic policies, and global financial conditions. While FIIs bring foreign capital into the economy, DIIs contribute to domestic liquidity and stability. Understanding their roles and distinctions helps in analysing market movements and investment strategies.
In this article, we will elaborate on who FII and DII in the share market and the differences between these two concepts.
Who are FIIs?
Foreign Institutional Investors (FIIs) are institutional entities that invest in the financial markets of a country other than the one where they are registered or headquartered. The term “FII” is commonly used in India, where it refers to outside entities investing in the nation’s financial markets.
Here are some key points about FIIs:
- Definition: FIIs are investors or investment funds from foreign countries that participate in the capital markets of a host country. They engage in various financial instruments such as stocks, bonds, and other securities.
- Role: FIIs play a significant role in providing finances and capital to enterprises in developing countries. Their investments can impact market liquidity, stock prices, and overall economic growth.
- Trading activity: You can track FII trading activity on stock exchanges like the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and Metropolitan Stock Exchange of India (MSEI). The data includes information on their buying and selling activities in the Indian capital market.
In summary, FIIs contribute to the global flow of capital and play a crucial role in shaping financial markets across borders.
Types of FIIs
Foreign Institutional Investors (FIIs) encompass various entities that invest in financial markets across borders, contributing to capital flows and economic development. Below are the primary types of FIIs:
1. Sovereign Wealth Funds (SWFs):
- Definition: SWFs are state-owned investment funds that are created using surplus reserves from national revenues, such as those generated from oil or other exports.
- Purpose: These funds aim to benefit the nation's economy and its citizens by investing in diverse assets globally to achieve long-term returns.
2. Foreign government agencies:
- Definition: These are entities or agents authorised by foreign governments to perform welfare and other services in another country.
- Role: They engage in various economic activities, including investments in foreign markets, contributing to international development and cooperation.
3. International multilateral organisations:
- Definition: These organisations consist of three or more countries collaborating to address common issues.
- Function: They play a vital role in managing global issues and ensuring coordinated relief efforts, with investments often focused on sustainable development and economic stability.
4. Foreign central banks:
- Definition: These are the main financial authorities of their respective countries, responsible for issuing currency and managing reserves.
- Activities: Foreign central banks engage in international investments and foreign exchange operations to manage their countries' monetary policies and economic health.
