What is DII Meaning?
- 06 Jun 2024
- By: BlinkX Research Team
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Domestic institutional investors (DIIs) are institutions or groups of investors who invest in a country's financial assets on behalf of corporations or organizations such as banks, insurance companies, mutual funds, and others. Simply said, local investors will combine their funds only for trading in their country's assets and resources.
Understanding DII in Share Market
DIIs, or domestic institutional investors, invest in the financial securities and assets of their home country, influenced by economic and political developments. They can influence net capital inflows in the economy, particularly in the Indian financial markets. In March 2020, DIIs invested ₹55,595 crores in the Indian equities market, setting a new national record. Local investors significantly influence the success of the stock market in India, especially when foreign institutional investors are the net sellers. Between April and August 2021, DII inflows totalled USD 7.1 billion, while FII flows reached USD 2.4 billion.
Table of Content
- Understanding DII in Share Market
- Types of DIIs in India
- How Do DIIs Work?
- What is the Difference Between FII & DII
Types of DIIs in India
In India, there are four categories of domestic institutional investors. They are:
How Do DIIs Work?
Domestic investment institutions (DIIs) are market movers due to their research and investments. Despite India's restrictions on the number of equity equities and assets FIIs can buy from a company, DIIs are not subject to these restrictions. DIIs invest for the long term, unlike FIIs, who focus on short- to intermediate investment.
The NSE website provides information on FIIs and DIIs, allowing retail investors to follow their activities and monitor their investments. This information can help identify high-quality firms without extensive analysis or investigation. Novice investors can partially rely on information on FII and DII operations for their research, as it is a reliable indicator of a company's future performance. Retail investors can also bet on a business if DIIs and FIIs have made investments, as it is a reliable indicator of the stock's performance.
What is the Difference Between FII & DII
The differences between FII and DII are:
Aspect | Foreign Institutional Investors (FIIs) | Domestic Institutional Investors (DIIs) |
Investor Location | Reside outside the country of investment. | Reside within the same nation as the investment. |
Ownership Restrictions | Limited to 24% of the total paid-in capital of the company. | Not subject to specific ownership restrictions. |
Ownership in Nifty 500 Companies | Own approximately 21% of the Nifty 500 companies. | Possess around 14% of the shares in Nifty 500 businesses. |
Investment Horizon | Typically, focus on short to medium-term investments. | Primarily engaged in making long-term investment decisions. |
Conclusion
Overall, understanding Domestic Institutional Investors (DIIs) is crucial for grasping the dynamics of the Indian stock market. DIIs, comprising entities like mutual funds, insurance companies, pension funds, and financial institutions, play a pivotal role in shaping market trends and liquidity. Their long-term investment strategies and significant capital inflows contribute to market stability and investor confidence. Retail investors can leverage information on DII activities to make informed decisions when using online trading app to navigate the ever-evolving investment landscape.