Explanation
The FII and DII are two investment concepts in India referred to as Foreign Institutional Investors (FII) and Domestic institutional investors (DII).
FII is defined as the foreign/international entity that invests in a country from outside the country. FII entities help countries grow in the financial market. The FII stands in its own words, which means that foreign companies invest in other countries’ companies.
DII stands for Domestic Institutional Investors which is completely the opposite of FII. DII only invests in the country in which they reside.
Both DII and FII can control the movement of the share market. The Financial Market depends on how FII and DII move but they are impacted indirectly.
Importance
On This Date 10 Jan 2025 the last FII and DII are as follows:
| Entity | Date | Buy Value in Cr. | Sell Value in Cr. | Net Value in Cr. |
| DII | 16-Jan-25 | 14,830.61 | 11,901.89 | 2,928.72 |
| FII/FPI | 16-Jan-25 | 11,077.77 | 15,419.72 | 4,341.95 |
The current Indian Sensex is 77,042 it’s 0.31% lower than the previous. This happened due to FII because FII is Negative so, that impacted on Indian stock market.
Nirmala Sitaraman was told in a budget speech that the FII and DII both can move the stock market but, the retail investors have more than FII and DII.
Retail Investors are individuals who invest in the stock market by opening a Demate Account. As per the last financial year, some report says that the Indian Stock market was started in 1875 but in the first 40-50 years there was a materialized system in the stock market So, the investors who invest in the market need to open a debate account first with there broker, afterward In 2020 to 2022 the demate account was open more than 80% than before from the stock market is started.
The current number is 179 Million demate accounts in India itself. It’s 0.1% Population of India.
Hooks
The following bullet points determine how FII and DII help to improve country growth and financial stability:
FRI
- Capital Inflows
- Market Efficiency
- Foreign Exchange
- Infrastructure Development
- Job Creation
- Global Credibility
- Technology and Expertise Transfer
DII
- Market Stability
- Support for domestic substances
- encouraging savings
- strengthening equity market
- policy advocacy
- economic diversity
- financial literacy
Purpose of this Article
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What is FII?
FII Includes Mutual Funds, Hedge Funds, and policies. FII is inclined to investment purposes to increase return as per the reports but sometimes the company causes penalties and investment restrictions due to country policies.
FII first met the conditions of SEBI (Security and Exchange Board of India) which is India’s Financial Exchange Regulator.
What is the difference between FII and FDI?
In simple words, FDI refers to foreign direct investment which means a company invests outside the home country while FI refers to a Company or individual that invests in a foreign market such as the the stock market, government bonds, etc.
Examples of foreign institutions involved in FII
- Foreign Central Banks
- Sovereign wealth fund
- Mutual Fund
- Bank
- Endowment
- Insurance Companies
- City Group
- HSBC
- Merril Lynch
How FII works: Channels and methods of investment
FII works based on Buying and Selling Stock at the pre-determined price of the stock market. FII stimulates the huge transaction across the country which builds the high cash flow across the country.
Advantage of FII in the Economy
Boosting Market Liquidity: Market liquidity is based on cash flow and FII does that every time because they can boost market liquidity.
Encouraging Innovation and Globalization: FII leads to more liquidity in the market and the key factor is cash flow. When the country’s cash flow is good then it would be very beneficial for the country’s innovation and globalization.
Potential drawbacks of heavy reliance on FII
Due to the high cash flow in the stock market, the market shows high volatility which causes either heavy down fall.
What is DII?
DII refers to ‘Domestic Institutional Investment’ it’s the same as FII which includes mutual funds, pension funds, insurance companies, and policies and they invest in the Indian stock market.
DII plays a crucial role in shaping the Indian financial economy which causes a heavy impact on the overall share market (Sensex). DII is a pillar of the Indian economy.
For instance, in March 2020 FII was a net seller which led down the stock market but DII stepped up with 55,000 Cr—investment which absorbs the negative impact of FII on the Indian stock market.
Comparison of FII vs DII
FII invests in foreign countries while DII invests domestically in its own country. Both Institutional Investments have a heavy impact on the country’s economy.
| FII | DII |
| Foreign Institutional Investment | Domestic Institutional Investment |
| Includes MF, Hedge Funds, Policies | Includes MF, Hedge Funds, Policies |
| This is for short-term investment and global diversification | This is for long-term investment and it tends to domestic economic development |
| FII gets foreign investment and capital only | DII gets domestic investment and capital only |
| FII enhances global exposure and maintains the global capital | More influenced by domestic factors such as economic policies, inflation, and GDP growth. |
| DII stabilises the domestic market including commodity and all | DII is stable in comparison with FII |
| FII is very volatile | DII is stable in compare with FII |
The role of FII and DII in the Indian economy
Statistical insights
Here is the historical and recent detailed insight for the FII and DII.
| DATE | FII EQUITY | FII DEBT | FII DERIVATIVES | FII TOTAL | MF TOTAL | MF DERIVATIVES | MF DEBT | MF EQUITY |
|---|---|---|---|---|---|---|---|---|
| 2025 | -80,017.7 | -1,736 | -194,169.7 | -275,923.3 | -27,394.6 | -23,395.4 | -61,765 | 57,765.8 |
| 2024 | -11,375.3 | 108,662.7 | -1,148,033.1 | -1,050,745.7 | -181,948.9 | -239,603.6 | -362,659.3 | 420,314 |
| 2023 | 176,774.6 | 69,920.3 | -814,559.7 | -567,864.8 | -6,952 | -84,013.2 | -80,365.2 | 157,426.5 |
| 2022 | -121,499.7 | -15,128.5 | 642,193.7 | 505,565.5 | 102,178.5 | -50,531.8 | -33,461.8 | 186,172.1 |
| 2021 | 25,768 | -11,284.6 | 262,799.2 | 277,282.6 | 180,105.9 | -26,317.9 | 128,789.6 | 77,634.2 |
| 2020 | 172,849.2 | -103,374 | 158,222.7 | 227,697.8 | 174,280.9 | 6,526.4 | 222,240.6 | -54,486.1 |
| 2019 | 100,150.4 | 24,133.4 | 238,068.3 | 362,352.1 | 547,634.2 | -35,937.7 | 531,334.6 | 52,237.3 |
| 2018 | -34,547.7 | -46,532.2 | 218,397.5 | 137,317.6 | 413,298.8 | -41,752.3 | 334,316.4 | 120,734.7 |
| 2017 | 52,465.2 | 148,270.3 | 113,432.2 | 314,167.8 | 502,732.8 | 2,290.7 | 381,667.7 | 118,774.4 |
| 2016 | 18,782.7 | -44,297 | 102,208 | 76,693.8 | 379,389.8 | 0 | 331,221 | 48,168.8 |
| 2015 | 18,355.7 | 46,920.7 | 127,809.4 | 193,085.8 | 506,294.6 | 0 | 434,097.5 | 72,197.2 |
| 2014 | 88,553.5 | 152,086.4 | 63,826.5 | 304,466.4 | 275,379.3 | 0 | 244,533 | 30,846.4 |
Impact On the Indian Stock Market:
FII’s contribution to volatility and growth
Foreign investment capital helps a country’s economy very effectively. the best example [le of the FII impact is the Indian stock market. FII knows the growth of their investment in the Indian economy or stock market.
Volatility Analysis
As the FII market fluctuate the nifty and sensex move as well it means that the fii majorly impact on the indian stock market. Look at the trend after Jan-04 the trend has seems to grow upward and continuosly increased.
The nifty and sensex is actual represewntative of indian stock market. Sensex depicts the top 30 companies of india and nifty shows the top 50 companies of the india. The majority of the companies is bluechip whose market valuation is more than ther midcap companies and small cap also.
DII’s role in counterbalancing market fluctuations
DII helps country to balance the fluctuation of the stock market. Although the DII is basically the domestic investment which increase the market value on the basis of profit and loss.
Not as much but the DII is key player of the indian stock market. When stock market face a market fluctuation the dii counter that and balance the whole jurk.