Should we follow FII & DII?

If there is one thing sure about the stock markets, it is the uncertain and unpredictable behavior of the market. With no certainty of future direction, small traders often in the search of telltale sign from the big Institutional investors, be it Domestic Institutional Investors or Foreign Intuitional Investors.

These set of baffling questions always arise in the thought of small traders?

Are the institutional investors buying or selling any stocks?

Which sectors are FII & DII betting huge on?

      What are the FII and DII saying about the market and the economic conditions of the country in the coming months and year?

      Which sector gonna perform well in next 6-12 months according to FII & DII.

   There’s a big misperception among small traders, that FII and DII knows in advance when and which sector or economy gonna do well. But the truth is they are also as clueless as small traders. But only thing that differentiate them from small traders in the market, they have best research team and good amount of information at their disposal. But remember, more information doesn’t equate to better decision in investing. We still have to deal with the uncertainty and unpredictability.

It’s futile to know what institutional traders are doing, we rather should invest our time in building a positive expectancy trading system, which will help us making money in trending period and protect our capital in non-trending periods over the long-term.

As a small trader in the market, we should always remember that we’ve a great advantage over big Institutional Traders/Investors because we have no liquidity issue on our side, we can easily get in and out of position.

However, you can check the transaction of FII/DII provided by NSE after the market close. If FII’s are investing in huge amount that denotes they see positive improvement and huge opportunities in our economy.

Like any other retail/investors operating in the market, Institutional investors are also on the search for better investment opportunities in the emerging market (Brazil, Russia, China & India) where their principal is safe and rate of return is rapid. Thus, we sometime see fall in the market due to outflow of funds by Institutional Investors.