What is DII?

December 15, 2021 by Vandana S · 3 min read


Domestic Institutional Investors (DII) invest in assets and securities of the country they are residing in. Their involvement in investments has an impact on the economic and political trends of the country. As of March 2020, approximately 55,959 crores were invested by DII in the Indian Stock Market.

Types of DII in India

1. Indian Insurance Companies

Insurance companies that are based in India and owned by Indian Owners are also under the umbrella term of DII. Insurance companies offer a set of options to its client- Term Insurance, Health Insurance, Home Insurance, Vehicle Insurance, Accident Insurance, Retirement schemes, and so on. Apart from proving insurance, these companies offer loans and other financial instruments like Unit Linked Insurance Plans (ULIP’s) to their client based on their requirement and risk appetite.

Unit linked Insurance Plans are the dual linking of investment and insurance. The individual makes payments every month in the form of a premium for the insurance and part of this money is invested in equity or debt or hybrid instruments after pooling of resources from other customers as well. The asset under ULIP is managed by fund managers who focus on creating a good corpus for the client. A lump sum amount is paid while taking the ULIP and premium is paid annually, semiannually, or monthly depending upon the client. The major benefits from ULIP are that along with insurance one gets returns from the market, a corpus which contains safety and savings, its flexibility makes this a good option for youngsters who are building their savings and it aids in tax benefits under deduction in 80C up to 1.5 lakh.

2. Indian Mutual Funds

Mutual funds are one of how one can invest in the market indirectly. There are many fund options available depending upon the risk appetite and investment amount of the individual. As of the year, 2020 mutual funds hold 11,722 crores approximately in the equity market. It’s beneficial as it’s flexible and all kinds of investors invest in mutual funds. Aligning their financial goals and their willingness to tolerate and take risks can aid in the curation of the right mutual fund choice for the investor.

3. Local Pension Funds

Pension schemes assist individuals who do not work in the government sector or have no pension facility post-retirement. India’s pension schemes run by the government like National Pension Scheme, Employee Provident Fund Organization, and Provident Public Fund also contribute to DII. As of 2020, they hold the maximum in equity investment worth approximately around 33,706 crores.

4. Banking and Financial Institutions

They play a vital role in investment in the market and financial instruments. The loan interest is put into the market in the form of debt or equity investments and the returns that the bank earns are the profits earned by the bank, The asset under management in the year 2020 grew by 20% for many banks and have steadily influenced the direction of movement in the stock market.

DII plays a vital role, just like FII when it comes to influencing the market. FII is considered a bigger shark in the ocean of the stock market and DII as the small sharks.

A shark is a shark. Big or small, they rule through the ocean and are important. What are your thoughts on DII and its importance in the market?