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

FIIs (Foreign Institutional Investors) are like your favorite foreign relative who always gets 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 relatives who get you gifts that are made in India.

Remember when recently there was news about FIIs taking out their money from India and how this was being blamed for the falling value of the rupee? Or do you remember reading or listening to headlines that sound like "FII pumped in money and stocks rallied at .... '' 

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's falling apart when FIIs take their money out of the system?  

What are FIIs? A lot of foreign institutions that have registered offices outside India - like foreign banks, foreign mutual funds, foreign governments, foreign insurance companies, and much more, always look to grow their money by investing in certain projects, companies, or fast-growing countries.

When a country (like India) grows and develops in terms of infrastructure and production and seems to have immense growth potential, it attracts attention from these FIIs. Since developing economies have a larger potential to grow and offer better returns than developed and mature economies, foreign institutions may decide to invest their foreign currency in developing countries via the stock exchange. This helps foreign investors to make better returns once the project is complete and also sometimes receive tax benefits on their investments.

In India, some of the largest and most popular foreign institutional investors (FIIs) happen to be: 

• Europacific Growth Fund
• Government of Singapore 
• Abu Dhabi Investment Authority
• JP Morgan
• DSP Blackrock 
• Franklin Templeton Investment Funds 

Think of FIIs as those close family friends or relatives who stay abroad and bring gifts for you and your entire family when they visit India. They wish you well, are encouraging, and often give you better pocket money than your Indian relatives because well, they are awesome and can afford it, and don't mind giving you more. You return the favor by sacrificing your room to their family and accommodating them in every possible way, every time they are here. They like you even more since they get a nice room to stay in for free. 

What are DIIs? 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 that come from a large number of country's investors, they can usually invest in larger amounts in different companies and can generate a larger effect on a company's growth. 

How do FIIs and DIIs impact the stock market?  FIIs and DIIs usually form about 35% of the activity of India's stock exchange activity and heavily influence the stock markets. When an FII or a DII invests in a company, it usually gives confidence to a large number of retail and individual investors. FIIs investment also increases a country's forex reserves which enable the government and the RBI to undertake monetary operations. 

How to find a DII / FII investment in stocks?

1. Log on to this website: https://ticker.finology.in/ 
2. Say you want to find the shareholding in Tata Steel. Enter the name of the stock in the search engine.  

   

3. Click on "Shareholding''

4. Check the ''Share holding pattern''