Decoding FII’s Impact on the Indian Stock Market
What are FII and DII inflows?
Foreign institutional investors or FIIs are those categories of investors that invest in the financial market of a foreign country. For example, if an investor from the US invests in the Indian market, they will fall under the FII category. These FIIs bring in money from foreign countries and invest in the stock market, where they see growth possibilities. FIIs are also known as Foreign Portfolio Investors (FPI). These are not individual investors. The various types of FIIs are Foreign Mutual Funds, Foreign Pension Funds, Foreign Central Banks.
Domestic Institutional Investors (DIIs) are institutional entities that invest in the financial markets of their own country. Unlike FIIs, which come from abroad, DIIs are local entities that manage and deploy funds within the domestic financial market. Types of DIIs are Mutual Funds, Insurance Companies, Banks and Financial Institutions, Pension Fund.
How do FII inflows impact the stock market?
FII activities often influence market sentiment. Positive FII inflows are generally viewed as a sign of confidence in the Indian economy, leading to a bullish market sentiment. That is because they trade in a much larger quantity of securities than an average individual investor. Stock prices can rise and fall depending on their trading activities. When a foreign investor invests in a market, it shows investor confidence in that market. As institutional investors have the advantage of performing a better due diligence compared to individual investors, a higher institutional stake in any company is considered a positive sign for a stock.
To give an example, FIIs had bought 9800 Cr and 50000 Cr in cash market in the months of November and December 2023 which took the market from a low of 18838 to an all time high of 21835 in just a matter of 2 months. Now let us look at what happens when FII turns sellers in the market. From October 2021 (when market was at an all time high of 18600) to June 2022 FII were net sellers in the market and the market made a bottom of 15180 in June 2022 which was a correction of almost 18%. So FII Inflows/Outflows are a huge indicator of where markets are going.
How can investors capitalize on FII inflows and sectoral trends to optimize their portfolios?
All of our smallcases – Bluechip High Growth Low Valuation Strategy, Smallcap High Growth Low Valuation Strategy and Emerging Stocks High Growth Low Valuation Strategy have stocks which have high FII Holdings. We base our research on stocks in which there is high FII Holding as well as we monitor the stocks in which there is FII inflows.
Investors can capitalize on Foreign Institutional Investor (FII) inflows and sectoral trends to optimize their portfolios by adopting a strategic and informed approach. If we see the data for 2023. Financial Services and Capital Goods sectors have seen the maximum buying by FII. Even in the last 3 months these sectors occupy the top 2 spots with FIIs investing more than 16000 Cr and 9000 Cr respectively.
Want to know more about FII Trends and how they impact India’s economy?
Join us in this insightful conversation with Shailesh Saraf, Founder of Value Stocks, as we unravel the influence of Foreign Institutional Investors (FIIs) on the Indian Stock Market.🌐
🔍Key Discussion Points:
- – Understanding the role of FIIs in shaping India’s stock landscape.
- – Analyzing the market trends and patterns influenced by Foreign Institutional Investors.
- – Insights into how FIIs’ strategies impact the behavior of the Indian stock market.
- – Shailesh Saraf’s expert perspective on navigating the stock market in the context of FIIs’ involvement.
Join us Live on YouTube this Saturday, 13th January ’24, 11AM onwards. Don’t forget to set a reminder!
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