All You Need to Know About Domestic Institutional Investors

An institutional investor is an entity that invests in financial markets on behalf of its clients.

Institutional investors who invest in securities within their own country are referred to as domestic institutional investors. Investments made in a nation's financial or physical assets by institutions or organizations like banks, insurance firms, mutual fund houses, etc., are referred to as institutional investments. Simply put, domestic institutional investors trade in domestic equities and assets using pooled funds. Many domestic economic and political trends have an impact on these investing choices. Qualified domestic institutional investors also have an impact on net investment flows into the economy in addition to foreign institutional investors.

Types of Domestic Institutional Investors in India

There are mainly four types of Domestic institutional investors in India. These include:

Indian Mutual Funds

Mutual funds are professionally managed funds that pool investments of several investors to buy securities such as stocks, bonds and other securities. Their investments are generally made as per the objective of the fund.

Mutual funds are primarily of four types – money market funds, bond funds, stock funds, and target date funds.

Due to their flexibility and adaptability, mutual funds are a well-liked investment choice in India for novice, intermediate, and experienced investors.

As of May 2021, the Indian mutual fund industry offers over 10 crore portfolios.

Local Pension Funds

These pension plans are designed to help people retire with as little stress as possible by helping them build a retirement corpus. The National Pension Scheme, Employees' Provident Fund Organization, and Provident Public Fund, are a few examples of government-run pension programs in India that contribute to the domestic institutional investor list. Local pension plans were the largest domestic institutional investors in the March 2020 quarter, with stock holdings of Rs 33,706 crore.

Indian Insurance Companies

Insurance businesses that are entirely based in India and owned by Indians are another category of domestic institutional investors. A variety of insurance choices, including life insurance, health insurance, retirement plans, term insurance, and others, are provided to customers by insurance firms. One can typically obtain loans and other kinds of financial instruments, such as ULIPs, from Indian insurance firms, depending on the extent of the company's offer. In the March quarter of 2020, insurance companies made a significant contribution of about 20,000 crores to the total stock holdings of DII.