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FII / DII data
If you are reading this article then you must be an active market participant or a passionate trader. Being a trader, it is very crucial to judge the market direction to be successful. Lot of tools are available in the market which will help you to understand the current market trend. You can use charts like candle stick, Heiken ashi,RSI, Stochastic, ADX, MACD etc. to judge the market direction and momentum.
All the above technique need a lot of efforts to master them. You will have to spend hours reading books and charts to learn these techniques.
Today, we will see a simple technique to measure the market direction. It is by tracking the FII / DII trading activity.
Before jumping in, we need to know who is FII and who is DII.
Foreign institutional investors
FIIs are those institutional investors which invest in the assets belonging to a different country other than that where these organisations are based. Foreign institutional investors play a very important role in any economy. These are the big companies such as investment banks, mutual funds etc, who invest considerable amount of money in the Indian markets. With the buying of securities by these big players, markets trend to move upward and vice-versa. They exert strong influence on the total inflows coming into the economy.
Domestic institutional investors
DIIs are the domestic counterparts of FIIS. Institutional investment is defined to be the investment done by institutions or organisations such as banks, insurance companies, mutual fund houses, etc in the financial or real assets of a country. Simply stated, domestic institutional investors use pooled funds to trade in securities and assets of their country.
Both FIIs and DIIs have a lot of influence on the market. They have huge amount of money collected from the individual investors. FIIs are more influential than DIIs on Indian markets. They are the big daddys of Indian markets.
Our strategy is simple, just to track the FII daily activities. I am not underestimating DIIs, but in all aspects FIIs are the real market movers.
- You can check this data from “https://www.nseindia.com
- Another good website is “http://www.moneycontrol.com
NSE India website gives you the update for the current day . But moneycontrol.com gives you the trends of previous months also. You need to check the “Net purchase / sale value under FII section carefully. If the net value is negative and in red colour then it is clear that FIIs are in a selling mood. you can see the screen shot here.
First section shows you the daily trend for the current month. In the below section you can see the monthly summary. As per the above data , FFIs are bearish on the market for the last two months. Obviously Nifty has dropped to 8000 level from 8900. It is a clear cut example of our theory.
Last but not least, find out the same data under DIIs section. If the net sell quantity from FII is almost equal to the net buy quantity of DIIs then the market will be in a balanced position and will be moving sideways. If FII are more aggressive in selling, then the market will go down. The transfer of equity/ derivatives between these two big players are actually driving the market.
As we see, retail players has no significant role in the market, so we need to track what the biggies are doing. Just following their path will bring you profit. If you are trading against the trend then it can be suicidal for you. Combining this information with other indicators like open interest will help you to improve your trading skills.