FII, DII Data: Who Is Buying And Selling In the Indian Stock Market? 5 Main Questions Answered

FII, DII Data: Domestic and foreign institutional investors (FIIs) are two poles opposite. If FIIs are sellers, DIIs tend to perform as buyers, a trend that has been witnessed since post-Covid-19. The October month has witnessed a similar trend. FIIs have become net sellers, with the most outflow of 2024, while DIIs have consistently been net buyers. While the latest selloff by FIIs is alarming, it is not scary. Why? Thanks to DIIs buying, Indian market is still well-placed despite the latest bearish and volatile sentiment.

Let's look at the data:

FII Data:

FIIs have been net sellers of the Indian stock market for 20 consecutive trading sessions, and that's mind-boggling. On October 25, the selloff was Rs 3,03675 crore in BSE and NSE, slower than the outflow of Rs 5.062.45 crore on October 24.

But October month has only seen selling pressure by FIIs. From October 1st to 25th, the Stock Edge reports which compiles cumulative data from NSE, showed that FIIs have sold up to Rs 1,00,242.17 crore worth of Indian equities. This is the record monthly selloff by FIIs in Indian stocks.

Also, FIIs have become net sellers after being buyers in September where the inflow of Rs 15,423.32 crore was recorded. FIIs were net sellers in August, May, April, February, and January, apart from the latest month.

That being said, the data showed that year-to-date, FIIs have sold up to Rs 2,25,274.59 crore in Indian stocks, which is nearing the record selling of Rs 2,78,429.52 crore witnessed in 2022.

Volatility in FIIs is expected to continue. But DIIs buying restores faith in Indian equities. How?

DIIs Data:

DIIs have been net buyers for 24 consecutive trading sessions, from September 23 to October 25, defying the bearish tone of market. On October 25, DIIs bought up to Rs 4,159.29 crore worth of equities, which is higher than the inflow of Rs 3,620.47 crore witnessed on October 24, 2024.

The domestic institutional investors (DIIs) are net buyers throughout October month. From October 1st to 25th, approximately Rs 97,090.83 crore inflow has been tapped by DIIs in Indian stocks. This is the highest monthly buying by DIIs, and also the biggest of 2024.

DIIs have been net buyers throughout 2024. So far, from January to date, DIIs have pumped in up to Rs 4,37,702.69 crore, which is record buying by these investors, and nearly double the amount of outflow from FIIs in 2024, hence cushioning the latter's impact.

Question 1: How DIIs Are Absorbing the selling from FIIs?

So far in October month, Sensex has nosedived by 4.864 points or 5.8%, while Nifty 50 bled further by 6.3% or 1,616.1 points. Still, analysts believe the impact of FIIs is absorbed by DIIs.

According to Dr V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services, the massive selling of FIIs has been absorbed by DIIs, who are receiving sustained fund inflows.

Question 2: Why FIIs Are Selling?

Vijayakumar said, the rationale behind FPI selling is the elevated valuations in India and the cheap valuations of Chinese stocks, which the FPIs have been buying aggressively since mid-September. This "sell India, Buy China" is most likely to be a short-term tactical trade; but it can run for some more time, given India's elevated valuations.

Question 3: What To Expect From FIIs And DIIs Ahead?

Shrikant Chouhan, Head of Equity Research, Kotak Securities said, market sentiment continued to be weighed down by weaker-than-expected Q2FY25 earnings prints and continued weak commentary. FPI flows are expected to remain volatile.

Meanwhile, Vijayakumar said, this trend of FII selling and DII buying is likely to sustain in the near term.

Question 4: What Is The Emerging Market Trend?

Chouhan said, FPI flows to date in Oct'24 were mixed for emerging markets. India, Brazil, Indonesia, Malaysia, South Korea, Thailand, and Vietnam witnessed outflows of US$8281 mn, US$509 mn, US$489 mn, US$183 mn, US$2279 mn, US$631 mn, and US$90 mn, respectively. The Philippines and Taiwan witnessed inflows of US$71 mn, and US$1590 mn, respectively.

Question 5: What Should Investors Do?

As per Vijayakumar, since financials constitute the lion's share of FPI holding, large-cap financials are under pressure. This is a buying opportunity for mid to long-term investors since this segment, particularly leading banking names, are fairly valued."