Every Investor already heard the term “Foreign Institutional Investors”, which is commonly used in the stock market, the involvement of Foreign Institutional Investors (FII) is very dense in the market, FII is the bodies like Mutual Funds, Insurance companies, banks etc registered in the Country.
As the FII holds a huge amount of money, of the people, the movement of the market is depending upon the huge flow of money from FII, they usually invest in the stock market and other assets class.
Every Stock expects to look into the data flow of money inward or outward both from FII.
Importance of FII for the Economy
FII are both plus and minus for the stock market, although they most bulk of the money to control the market and are also pumping the money to make some profits.
Advantages of Foreign Institutional Investors
# Foreign Institutional Investors consists of top-class experts having knowledge of companies and able to calculate the value of the companies at any snap of time, they believe in fundamental analysis. which is more transparent and also lead more profitability for the investors.
# The amount of money they invest, turn the market into the busy market which improves the volume of the shares and also improve the transaction system of the market.
# Inflow of money from Foreign Institutional Investor every year also attract other DII and foreign investors to invest in the market, it is beneficial for the Domestic investors.
# Higher Volume in the particular companies from FII indicates there is some strength available in the company, and the share price is undervalued. Inflow from FII also help the Hedging funds to grow.
Disadvantages of Foreign Institutional Investors
# Foreign Institutional Investor always in a race to earn a profit and having a lot of money, use to switch the companies earn a profit and come out, this frequent movement causes the market volatile and also price fluctuation which causes great loss to the short covering investors and F&O investors.
# Allowing investment of more and more of Foreign Institutional Investor loose control of Indian Investors (DII). Due to huge money, Foreign Institutional Investor can intentionally control the share price, which creates huge losses for the small investor.
As an Investor, if you are analyzing a stock, the percentage of the holding of Foreign Institutional Investors holding is an important factor to get the worth of the company as compared to other companies in the same sector. If the % of FII is very large that means the share price is very much volatile, and there are more chances to get the share price Drop.