What is FII vs DII?

‘FII’ stands for ‘foreign institutional investor,’ and refers to an investment fund or an investor who puts their money into a country’s assets while being headquartered outside of it. In India, this is a commonly used term to refer to outside entities contributing to the country’s financial markets by investing. On the other hand, ‘DII’ stands for ‘domestic institutional investors.’ Unlike FIIs, DIIs are investors that invest in the financial assets and securities of the country they are currently residing in. 

These investment decisions of both FIIs and DIIs are impacted by political and economic trends. Additionally, both types of investors — foreign institutional investors (FIIs) and domestic institutional investors (DIIs) —  can impact the economy’s net investment flows.

Types of FII vs DIIs

When it comes to the difference between FII and DII with respect to their types, there isn’t much that differs except for where the entity is headquartered. In India, there are a total of four sets of domestic institutional investors. These are Indian mutual funds, local pension schemes, Indian insurance companies, and banks or financial institutions. On the other hand, FIIs for India include hedge funds, pension funds, international insurance companies, and mutual funds, all of which aren’t India-based.

Influence of FII vs DIIs

For India, FIIs are quiThe difference between FII and DII with respect to influence is a matter of the current economic scenario. Domestic institutional investors currently have quite a decisive role with respect to the performance of the Indian stock market, especially when foreign institutional investors are the county’s net selte an important driver of capital. However, India has placed a restriction on the total value of assets foreign institutional investors can buy as well as the number of equity shares they can buy within a single company. This works to limit the influence that FIIs can have on individual companies as well as the nation’s financial markets. Additionally, this limit also serves to prevent potential damage by reducing the influence FIIs have on India’s markets, such that the nation’s economy wouldn’t take a hit if FIIs fled en masse. 

lers. As of March 2020, DIIs invested a cumulative ₹55,595 crores in the Indian equity market. This was a record investment for the country within a single month.

FII vs DII Competitive Analysis for 2020

1. Asset under Management (AUM)

After the March quarter, as of April 2020, foreign institutional investors had about ₹24.4 lakh crores in their assets under management whereas domestic institutional investors had a total of ₹20.4 lakh crores. Since January of 2020, DIIs saw a fall of about 10% in their AUM while FIIs saw a fall that is more than double that at about 21.3%.

2. Equity Holdings

For the BSE 500 index, the equity holdings of domestic institutional investors reached nearly one-third of the overall free-float market’s capitalization. In the March 2020 quarter, domestic institutional investors increased their stake in 106 Indian companies by 1% while cutting stake in 42 Indian companies present on the BSE-500 index. The most prominent companies where domestic institutional investors raised their stakes are Eicher Motors, Power Grid Corporations, Coal India, ONGC, and NTPC by putting an amount greater than ₹15,000 crores into them.

On the front of equity holdings, those of foreign institutional investors’ equity holdings in India on the BSE 500 index fell by 0.70% to 21.5% of the total market capitalization for that index. What was observed in the Match quarter of 2020 was that foreign institutional investors also cut their stake in 27 Indian companies on India’s Nifty 50.

3. DII vs FII Ownership Ratio

The FII vs DII ‘ownership ratio’ is equal to the total FII equity holdings divided by the total DII holdings for any given duration. From its peak ratio in April 2015, this ratio has not dropped to 1.2 in April of 2020. Investors argue that there is a combination of two reasons that led to this drop in the DII vs FII ratio. 

– The quick and exponential growth in the inflows of DIIs into Indian equities

– A comparatively heavier sell-off by FIIs with respect to their fresh inflows.

Hence the current DII vs FII ownership ratio reflects how robustly DIIs have been investing compared to FIIs.

4. Inflows/Outflows YTD

Since January of 2020, DIIs have invested about ₹72,000 crores year to date. Foreign institutional investors have removed about ₹39,000 crores from Indian equity markets at the year to date.