Invest Wisely by Tracking the ‘Whale of the Share Market’

I’m sure most of you have heard or read about Bulls or Bears in relation to the share market or stocks. But, you might be wondering who this ‘Whale of the share market’. Don’t scratch your head so much, you will definitely get to know about the Whale I’m referring to in the next paragraph and the reason by the end of this blog.

Introduction

FII & DII are often referred to as the Whales of the share market. Wondering what is meant by FII & DII? Take a chill pill! I’m going to explain FII & DII in simple terms and in a way I remember these concepts. When I first came across this acronym, FII & DII, I just asked my friend to explain what it actually means. He just replied, ‘FII stands for Foreign Institutional investors, & DII stands for Domestic Institutional investors, and stopped at it. This is the first thing you will see if you Google FII & DII. 

Let’s understand this with an example:

Consider the following scenario: you want to start your own business or you want to expand your current one. In both cases, you are looking for an investor. Consider that your company has two potential sources of funding. First, your family, friends, or other investors in the country will express interest and offer the necessary funds/investments.  Second, you might find a friend/investor who is staying abroad. The first type of investor is represented by DII, while the second type is represented by FII. In other words, FII are those who make investments in countries that are not the same as their own. DII, on the other hand, refers to those who make investments in other companies/entities within their own country. However, the amount of money invested by these investors (FII & DII) is substantial, and their actions can have a direct impact on the market.

Examples of FIIs:

• Europacific Growth Fund
• Abu Dhabi Investment Authority (ADIA)
• Foreign Pension Funds

Examples of DIIs:

• LIC
• HDFC Life
• Mutual Funds

Why is it important for Retail investors?

FIIs and DIIs, like retail investors, profit from dividends and capital appreciation. Furthermore, they have access to information that is difficult for us (retail investors) to obtain. As a result, it makes sense to monitor what these investors are doing and, on occasion, to follow them as they make investments. Decisions based on FII and DII data can be very useful when you do not want to hit your head with complicated analysis. If you are wondering where you can get this information, do not worry! Paytm Money provides you with FII & DII activity (available for both Cash Markets & Futures) with different timelines, be they daily, monthly, or yearly, at your fingertips. 

When FIIs invest in the market, the index typically rises quickly, causing it to jump higher. Similarly, their decision to sell could destabilize the market, causing the index to fall. However, the importance of DIIs and retail investors has grown in recent years, and they have begun to defend market trends when FIIs begin to dump. Still, as a retail investor, you might not want to ignore this trend when making decisions.

Simple steps to access FII & DII activity from Paytm Money mobile application

Step 1: Open Paytm Money mobile application and you will be able see the home page similar to the below attached image.

Step 2: Click on the F&O menu in the top ribbon and you will be taken to the F&O dashboard. On the dashboard you will be able to see different sleek cards providing information about market indices, snap of FII/DII activity, FnO News, etc.

Step 3: Click on the FII/DII activity sleek card to look into detailed information. Now, you will be able to see the expanded data on FII/DII. The below image shows the daily data for FII in cash markets.

Step 4: You can click on the dropdown present at the top right corner to change the timestamp to monthly and the image representing the monthly data is attached below.

Step 5: Similar to the above step, now you can change the monthly data to yearly. You can also view DII data in a similar way. 

You might be wondering, having gotten the above information about FII/DII activity, what we can do with it. Though there is a correlation between FII/DII activity and the stock market, the significance of the relationship between FII & stock market indices may not be statistically acceptable.

Here is a simple way to understand the impact of FII flow into the market: For example, one can just select the monthly FII data consecutively for a certain duration, calculate the net flow into the Indian market, and compare it against the change in the NIFTY index for the same duration to understand the pattern. Similar pattern identification can also be done using yearly & daily data and accounting for DII for deeper understanding.