Difference between FII & DII

Authored by
Team Espresso
September 07 2022
2 min read

FIIs vs DIIs: Who They Are and Why They Are Important

Foreign investors play a crucial role in accelerating (or decelerating) the growth of an economy. When they invest in a country, they help improve the inflow of capital, boosting the overall economy's health. In India, these foreign investors are generally categorized as follows:

  • non-resident Indians (NRIs)
  • Persons of Indian origin (PIOs)
  • Foreign institutional investors (FIIs)

While most people have heard of NRIs and PIOs, what are FIIs? Who are they, and why are they often compared to DIIs domestic institutional investors (DIIs)? Read ahead to unravel this financial mystery. 

Who are FIIs?

Foreign institutional investors are a set of investors that invest beyond the bounds of their home country. They invest in economies with strong growth prospects. To be able to trade in India, they must register with our markets' regular Securities and Exchange Board of India (SEBI). 

FIIs create an influx of funds in the economy because they invest at a percentage higher than retail investors. Since they are an important entity in the Indian financial system, SEBI has eased restrictions on FIIs, and the RBI has approved designated banks to act as banks facilitating FIIs. FIIs can invest up to 10% of the equity of any company, subject to a cap of 24% on investments by all FIIs, NRIs, and overseas corporate bodies (OCBs).

Examples of FIIs in India include the Bank of Singapore and Morgan Stanley. 

Who are DIIs?

Domestic institutional investors, as the name suggests, refers to the group of investors that invest within their domestic country. These investors invest within India based on economic, legal, and political conditions. They are responsible for the creation of liquidity in the market. 

Examples of DIIs in India include HDFC Life and LIC.

What are the types of FII and DII that may be registered in India?

Types of FIIs that may be registered in India:

  • Mutual funds 
  • Investment Trusts
  • Banks 
  • International Pension Funds 
  • Foreign Central Banks 
  • Sovereign Wealth Funds 
  • Insurance companies 
  • Endowments in the public interest 
  • Foreign Government agencies 
  • International Multilateral Organizations

Types of DIIs that may be registered in India:

  • Indian mutual funds 
  • Local pension funds 
  • Indian banks
  • Indian financial institutions 
  • Indian insurance companies 

Significance of FIIs and DIIs

FIIs and DIIs are market movers, and their purchasing and selling volumes affect the direction of financial markets. FIIs may be a boon to the Indian economy, but a bane as well, because when they withdraw capital, they impact the market negatively. Thus, to curb this possible negative influence of FII on the Indian market, the RBI and SEBI have levied several restrictions on them.  

What is the difference between FII and DII?

Now that we have a general idea about FII and DII, here are some differences between them: 


FII- and DII-led inflows and outflows impact market strength and serve as liquidity indicators. Both are crucial for the economy’s growth, but they may be hard for novices to understand and invest in. Thus, research must be done before diving into the world of FIIs and DIIs. Said research must include the study of the stocks, balance sheets, company growth, and economic conditions, among other factors.

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