Every time you go through our market reports, we mention details about Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). Who are they? Can they control the market?

We have already covered FIIs. In this jargon article, we will learn more about DIIs.

Domestic Institutional Investors

DIIs are institutions based in India such as mutual funds, insurance companies, pension funds, and banks & other financial institutions. They pool funds from clients and invest them in equity as well as other financial assets such as debt and gold. Let us look at how DIIs have performed in the financial year 2021-22 (FY 22) so far.

the graph showing FII, DII activity across  FY 22, DII brought for Rs 30,000 crore in November

From April 2021, DIIs have emerged as net buyers. They have bought for ~Rs 30,560 crore in the cash market.

Mutual funds

A mutual fund takes money (investments) from different individuals and institutional investors who have a common investment objective. This pooled sum of money is managed by a professional fund manager, who invests in securities and assets to generate returns for investors. 

According to the risk appetite of the investment scheme, they broadly invest in equity (comparatively riskier), gold, and fixed income securities (bonds, debts).

Let us look at the top mutual fund houses in India by Assets Under Management (AUM). AUM refers to the total market value of the investments made by a fund house.

Horizontal bar graph showing the top mutual fund houses as domestic investors. SBI stands first followed by ICICI

Insurance Companies

An insurance policy is an agreement between the insuree (customer) and the insurer (insurance company). According to this contract, the insured person has to pay regular premiums to the insurance company.  There are multiple insurance options from life insurance to health, automobile, electronics, etc. In case of any claim by the insuree, the company will provide them with a lump sum amount within the policy limit. In order to hedge this risk, the insurance company pools in the premiums collected from clients and invest in various financial instruments.

Horizontal graph showing the premium collected by insurance companies. LIC leads the market followed by SBI LIFE

Life Insurance Corporation of India (LIC) has a massive 50%+ market share in the life insurance segment. It is one of the largest DIIs in India.

Pension Funds

Pension schemes are offered to citizens to create a hassle-free retirement life with a sufficient corpus. An individual pays a fixed amount during their working life and will receive a monthly pension post-retirement.

Since these schemes are market-linked products, a fund manager will pool money and invest into multiple financial assets.

National Pension Scheme (NPS),  Public Provident Fund (PPF), Employees Provident Fund Organisation (EPFO) are some of the pension funds.

Banks & Other Financial Institutions

Banks and Non-Banking Financial Institutions (NBFCs) also participate in investments for their long-term goals. They primarily invest in government securities, corporate bonds as they are low-risk, fixed return investment vehicles.