What Is The Difference Between Institutional Investor and Retail Investor in India?

Classroom

oi-Sunil

By Sunil Fernandes

Updated: Tuesday, March 31, 2015, 9:55 [IST]

For those who are regular traders in the markets, this question may seem nonsensical. For those who are still novice, they might certainly want to know the difference between the two.

Institutional investors in India could mean the Life Insurance Corporation, which is a big player in the market along with other insurance companies who tend to invest in the share market in India and could also include other players like mutual funds.

In India we have a host of mutual funds like HDFC Mutual Fund, SBI Mutual Fund, ICICI Prudential - all of these could be categorised as institutions.

Retail investors on the other hand are a set of investors who invest money on their own behalf and through their own accounts. They do not do it on behalf of others like mutual funds or other domestic institutions do.

Here is a quick difference between the two:

1) Institutional investors invest on behalf of others. Retail investors invest on behalf of themselves.

2) Institutional investors have a certain level of expertise when it comes to investing. A retail investor may or may not have expertise when it comes to investing.

3) Both can be traders as well as investors.

4) Institutional investors have large ticket orders, which can have the tendency to push share prices higher or lower. Do not have the capacity to really push individual stock prices higher.

Institutional investors tend to rely heavily on research backed data to buy and sell shares. They also have analysts who engage in the same and then come out with research reports. Retail investors tend to do their own analysis. More often then not, they fail to do any kind of analysis and buy based on information from others.

Institutional investors may have access to real time stock quotes, technical charts etc., while retail investors might not.

Clearly, there are plenty of differences between a retail and a institutional investor. The one clear difference is that the first one is a larger investor and the second is a much smaller investor.

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