Your guide to Foreign Fund Flows!

Foreign institutional investors (FIIs) are investors in a country who are from another country. In other words, they are registered investors of the foreign country.

FIIs can be a single individual or usually a fund. In case of a fund, they can be of various types like long-only funds or hedge funds (which can go short on the market too).

They can be pension funds, mutual funds, insurance funds, private portfolio investment funds, hedge funds, private equity funds, venture capital funds, investment banks, etc. They can invest in equity, markets, debt markets, or both, depending on the type.

All FIIs must be registered with SEBI to participate in the Indian financial markets.

To know which stocks FIIs are buying, check out Equitymaster’s Indian stock screener.

This screen tracks the stocks recently bought by FIIs in India and the stocks recently sold by FIIs in India.

FIIs have deep pockets and thus have access to extensive financial infrastructure as well as the best talent. They make financial decisions with the objective of maximising their risk-adjusted returns.

FIIs are extremely market savvy and keep track of vast amounts of real time data to help them make the best decisions.

However, this does not mean you should blindly copy their buy/sell decisions. Their specific investment objective and time horizon are not parts of publicly declared information about their investments.

Also, FIIs are infamous for jumping in and out of investments very fast. Thus, its easy to confuse their trading with investing.

The big difference between FIIs and DIIs is that FIIs are foreign entities while DIIs are Indian entities.

DIIs are domestic institutional investors like mutual funds, insurance companies, pension funds, portfolio management services, etc.

They operate in a similar manner in the market however, FIIs have to comply with more regulations than DIIs.

Check out Equitymaster’s Indian stock screener which tracks the buying and selling activity of these big names.

Here are some of the popular screens:

• Stocks recently bought by FIIs in India
• Stocks recently bought by mutual funds in India
• Stocks recently sold by FIIs in India
• Stocks recently sold by mutual funds in India

FIIs have various criteria for buying and selling stocks as well as different holding periods. This results in FIIs holding a vast collection of stocks across sectors, themes, and marketcaps.

Their favourites are large stable companies with good managements. Most companies in the benchmark indices Sensex and Nifty will qualify. They also invest in high quality, fast growing midcaps and to a lesser extent, smallcaps.

For an entire list, check out stocks with the highest FII shareholding.