FII/FPI Analysis
- Thread starter travi
- Start date
Every day I hear people whether on TV or sometimes in the Forum talking about FII or DII sell-off in large quantities.
I read in a few places where some Pro's advocate to neglect that data. The reason I feel so is because most of the times, most people, misinterpret the data or quote it out of Context.
I will address the relationship here and how the data can be best used for different purposes.
After a few initial posts, we'll move the thread for general discussion.
PS: I learnt something about the Debt Markets the hard way, I will share that experience too
and what motivated me to learn more about it.
I read in a few places where some Pro's advocate to neglect that data. The reason I feel so is because most of the times, most people, misinterpret the data or quote it out of Context.
I will address the relationship here and how the data can be best used for different purposes.
After a few initial posts, we'll move the thread for general discussion.
PS: I learnt something about the Debt Markets the hard way, I will share that experience too
and what motivated me to learn more about it.What is the Market?
Part 1
What is the Market?
This is a very profound question, and in most cases, people refer to the Secondary Equity Market as "The Market" which is technically incorrect.
Lets look at the "real" markets and their purpose.
The Financial Markets can broadly be divided into:
1. Money Market For debt securities (short term usually less than one year) Eg. 90-days treasury bills.
Short term non equity debt instruments including treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc.
2. Capital Market for long-term debt and equity shares.
Capital funds comprising of both equity and debt are issued and traded.
Both Private placement sources of debt and equity as well as organized markets like stock exchanges.
Capital market can be further divided into (Only in brief)
1. Primary markets.
IPO, direct transfer of instruments, subscriptions for Capital fund raise etc
A very formal market with comparatively Low Volumes.
2. Secondary markets.
Securities are traded after being initially offered to the public. Majority of the trading is done here.
For the general investor, the secondary market provides an efficient platform for trading of securities.
Now, this is where you need to pay attention
The Secondary market comprises of
1.Debt markets
2.Equity markets
Part 1
What is the Market?
This is a very profound question, and in most cases, people refer to the Secondary Equity Market as "The Market" which is technically incorrect.
Lets look at the "real" markets and their purpose.
The Financial Markets can broadly be divided into:
1. Money Market For debt securities (short term usually less than one year) Eg. 90-days treasury bills.
Short term non equity debt instruments including treasury bills, commercial papers, bankers acceptance, certificates of deposits, etc.
2. Capital Market for long-term debt and equity shares.
Capital funds comprising of both equity and debt are issued and traded.
Both Private placement sources of debt and equity as well as organized markets like stock exchanges.
Capital market can be further divided into (Only in brief)
1. Primary markets.
IPO, direct transfer of instruments, subscriptions for Capital fund raise etc
A very formal market with comparatively Low Volumes.
2. Secondary markets.
Securities are traded after being initially offered to the public. Majority of the trading is done here.
For the general investor, the secondary market provides an efficient platform for trading of securities.
Now, this is where you need to pay attention
The Secondary market comprises of
1.Debt markets
2.Equity markets
Part 2
The Secondary market comprises of
1.Debt markets or DM
Low Risk and potential Low RoI
These are generally Fixed Income inst. issued by:
Central and State Governments, Municipal Corporations, Govt. Bodies or by private entities like financial institutions, banks, corporates, etc
In simple terms, a bond/debt is like a loan in which the investor is a lender.
The best part is bcos it is an instrument, anyone can buy or sell as a trade instead of all the paperwork intricacies.
Some examples of what Debt Inst look like:
DM Inst......................Fix Return..........Issue Dt......Maturity Dt
GOI LOAN...................10.45% 2018....30-Apr-01....30-Apr-18
GOI LOAN...................11.60% 2020....27-Dec-00....27-Dec-20
SDL NAGALAND.............8.60% 2021....08-Jun-11.....08-Jun-21
SDL TAMIL NADU...........8.59% 2021....08-Jun-11.....08-Jun-21
SDL JAMMU & KASHMIR..8.61% 2021....08-Jun-11.....08-Jun-21
You can get data of all Debt instruments traded on NSE here:
https://www.nseindia.com/products/content/debt/wdm/homepage_wdm.htm
Liquid(small part and more in Money markets),Debt, Balanced or Hybrid Mutual Funds etc form their bulk from this market.
Across the Globe, Debt Markets are by far the larger of the two.
Mark this point, we will revisit this in the later posts
2.Equity markets or EM
Higher Risk and potential Higher RoI
infinite loss to infinite profit, nothing guaranteed.
Even though in volume(Crores), EM are lesser than DM, this is most popular.
Very briefly, it consists of Equities (stocks), Currencies, Commodities and Derivatives (FnO)
EM based inst. also can be categorized here like EQ MF etc
This is where all the crazy things happen, the adrenaline rush,
stories of accounts being blown, overnight millionaires, get rich quick schemes, scripts for movies (like Wall Street etc) & bankruptcy.
The Secondary market comprises of
1.Debt markets or DM
Low Risk and potential Low RoI
These are generally Fixed Income inst. issued by:
Central and State Governments, Municipal Corporations, Govt. Bodies or by private entities like financial institutions, banks, corporates, etc
In simple terms, a bond/debt is like a loan in which the investor is a lender.
The best part is bcos it is an instrument, anyone can buy or sell as a trade instead of all the paperwork intricacies.
Some examples of what Debt Inst look like:
DM Inst......................Fix Return..........Issue Dt......Maturity Dt
GOI LOAN...................10.45% 2018....30-Apr-01....30-Apr-18
GOI LOAN...................11.60% 2020....27-Dec-00....27-Dec-20
SDL NAGALAND.............8.60% 2021....08-Jun-11.....08-Jun-21
SDL TAMIL NADU...........8.59% 2021....08-Jun-11.....08-Jun-21
SDL JAMMU & KASHMIR..8.61% 2021....08-Jun-11.....08-Jun-21
You can get data of all Debt instruments traded on NSE here:
https://www.nseindia.com/products/content/debt/wdm/homepage_wdm.htm
Liquid(small part and more in Money markets),Debt, Balanced or Hybrid Mutual Funds etc form their bulk from this market.
Across the Globe, Debt Markets are by far the larger of the two.
Mark this point, we will revisit this in the later posts
2.Equity markets or EM
Higher Risk and potential Higher RoI
infinite loss to infinite profit, nothing guaranteed.
Even though in volume(Crores), EM are lesser than DM, this is most popular.
Very briefly, it consists of Equities (stocks), Currencies, Commodities and Derivatives (FnO)
EM based inst. also can be categorized here like EQ MF etc
This is where all the crazy things happen, the adrenaline rush,
stories of accounts being blown, overnight millionaires, get rich quick schemes, scripts for movies (like Wall Street etc) & bankruptcy.
Last edited:
Every day I hear people whether on TV or sometimes in the Forum talking about FII or DII sell-off in large quantities.
I read in a few places where some Pro's advocate to neglect that data. The reason I feel so is because most of the times, most people, misinterpret the data or quote it out of Context.
I will address the relationship here and how the data can be best used for different purposes.
After a few initial posts, we'll move the thread for general discussion.
PS: I learnt something about the Debt Markets the hard way, I will share that experience too and what motivated me to learn more about it.
I read in a few places where some Pro's advocate to neglect that data. The reason I feel so is because most of the times, most people, misinterpret the data or quote it out of Context.
I will address the relationship here and how the data can be best used for different purposes.
After a few initial posts, we'll move the thread for general discussion.
PS: I learnt something about the Debt Markets the hard way, I will share that experience too
and what motivated me to learn more about it.
Great. :thumb: It's on...
Looking forward to a wonderful ride.
Part 2
The Secondary market comprises of
1.Debt markets or DM
Low Risk and potential Low RoI
These are generally Fixed Income inst. issued by:
Central and State Governments, Municipal Corporations, Govt. Bodies or by private entities like financial institutions, banks, corporates, etc
In simple terms, a bond/debt is like a loan in which the investor is a lender.
The best part is bcos it is an instrument, anyone can buy or sell as a trade instead of all the paperwork intricacies.
Some examples of what Debt Inst look like:
DM Inst......................Fix Return..........Issue Dt......Maturity Dt
GOI LOAN...................10.45% 2018....30-Apr-01....30-Apr-18
GOI LOAN...................11.60% 2020....27-Dec-00....27-Dec-20
SDL NAGALAND.............8.60% 2021....08-Jun-11.....08-Jun-21
SDL TAMIL NADU...........8.59% 2021....08-Jun-11.....08-Jun-21
SDL JAMMU & KASHMIR..8.61% 2021....08-Jun-11.....08-Jun-21
You can get data of all Debt instruments traded on NSE here:
https://www.nseindia.com/products/content/debt/wdm/homepage_wdm.htm
Liquid(small part and more in Money markets),Debt, Balanced or Hybrid Mutual Funds etc form their bulk from this market.
Across the Globe, Debt Markets are by far the larger of the two.
Mark this point, we will revisit this in the later posts
2.Equity markets or EM
Higher Risk and potential Higher RoI
infinite loss to infinite profit, nothing guaranteed.
Even though in volume(Crores), EM are lesser than DM, this is most popular.
Very briefly, it consists of Equities (stocks), Currencies, Commodities and Derivatives (FnO)
EM based inst. also can be categorized here like EQ MF etc
This is where all the crazy things happen, the adrenaline rush,
stories of accounts being blown, overnight millionaires, get rich quick schemes, scripts for movies (like Wall Street etc) & bankruptcy.
The Secondary market comprises of
1.Debt markets or DM
Low Risk and potential Low RoI
These are generally Fixed Income inst. issued by:
Central and State Governments, Municipal Corporations, Govt. Bodies or by private entities like financial institutions, banks, corporates, etc
In simple terms, a bond/debt is like a loan in which the investor is a lender.
The best part is bcos it is an instrument, anyone can buy or sell as a trade instead of all the paperwork intricacies.
Some examples of what Debt Inst look like:
DM Inst......................Fix Return..........Issue Dt......Maturity Dt
GOI LOAN...................10.45% 2018....30-Apr-01....30-Apr-18
GOI LOAN...................11.60% 2020....27-Dec-00....27-Dec-20
SDL NAGALAND.............8.60% 2021....08-Jun-11.....08-Jun-21
SDL TAMIL NADU...........8.59% 2021....08-Jun-11.....08-Jun-21
SDL JAMMU & KASHMIR..8.61% 2021....08-Jun-11.....08-Jun-21
You can get data of all Debt instruments traded on NSE here:
https://www.nseindia.com/products/content/debt/wdm/homepage_wdm.htm
Liquid(small part and more in Money markets),Debt, Balanced or Hybrid Mutual Funds etc form their bulk from this market.
Across the Globe, Debt Markets are by far the larger of the two.
Mark this point, we will revisit this in the later posts
2.Equity markets or EM
Higher Risk and potential Higher RoI
infinite loss to infinite profit, nothing guaranteed.
Even though in volume(Crores), EM are lesser than DM, this is most popular.
Very briefly, it consists of Equities (stocks), Currencies, Commodities and Derivatives (FnO)
EM based inst. also can be categorized here like EQ MF etc
This is where all the crazy things happen, the adrenaline rush,
stories of accounts being blown, overnight millionaires, get rich quick schemes, scripts for movies (like Wall Street etc) & bankruptcy.
2.Equity markets or EM [contd...from previous post]
They have Cash Markets, settled/delivered immediately.
Futures Market, settlement at a specified future date.
Part 3 The rules
FII or DII, everybody has to follow the rules.
Its a misconception that big players are always winners.
The MM & RM rules apply, no one can come to the rink to gamble, especially when it is lended money.
What attracts FIIs ?
I can give you a simple example of disparity in lending and interest rates.
For eg.,
Time Deposits commonly known as "Certificate of Deposit" in USA or "Fixed Deposit" in India,
have an average rate of 2.5% p.a. in USA.
For an AMC, if they could offer 3% p.a. to customers in US, and invest at ~10% p.a in India DM Govt securities,
What more could they ask for.
All they need to manage is currency fluctuations which can hurt them the most.
Why would one risk large amounts for a dream of 20-30% returns p.a.?
This means even they are aware that this doesn't happen consistently.
Table 1
That leads to a good conclusion,
Scenario 1. FII out of EM and in DM: EM not favourable
Scenario 2. FII out of DM and in EM: EM is favourable
Scenario 3: FII in EM & DM: What Indian economy wants
Scenario 4: FII out of EM & DM: Bad for Indian economy
This is the wisest interpretation.
The bane of DIIs
I say bane, because the way they have been regulated, they have access to the same instruments but not the flexibilty of straight returns that the FII
enjoy like stated in the example above. They have to work harder and perform better.
When standard FDs are around 9%, their DEBT MFs have to be consistent around 11-15%, to attract investors.
FII vs DII
Most of the websites tend to post the NET Daily position of FIIs and DIIs.
The reason I discourage people to look at NET daily positions is bcos it really doesn't make any difference.
Point 1. Yes, it is very important to look at weekly or monthly trends of the NET sell/buy.
You can use Table 1 to interpret the perspective of FII.
Figure out what FII is doing from the four scnarios.
Why do DIIs buy when FIIs are heavily selling-off (& vice-versa), are the DIIs nuts?
The plain answer is a big NO.
Its clear and simple logic, for now I'm considering EM&DM, what people look at NET figures and comment.
Since the FIIs have many markets (from various countries) to choose from, they panic (for lack of a better word) at the first signs of uncertainty.
As they start selling heavily, the lower valuations are great opportunities for DIIs to buy.
Its like buying on dips. Again, DM has far more volumes than EM. More the FIIs sell, happier the DIIs are to get lesser priced DM instruments.
Conversely, when FIIs come back to buy, the DIIs can price it higher and book profits.
That is why most cycles show opposite buying and selling.
If both are selling, its most likely to be bad news of booking profits aand if both are buying then its likely that there is a good run.
What's in for the day trader? Hold on, more posts to come
They have Cash Markets, settled/delivered immediately.
Futures Market, settlement at a specified future date.
Part 3 The rules
FII or DII, everybody has to follow the rules.
Its a misconception that big players are always winners.
The MM & RM rules apply, no one can come to the rink to gamble, especially when it is lended money.
What attracts FIIs ?
I can give you a simple example of disparity in lending and interest rates.
For eg.,
Time Deposits commonly known as "Certificate of Deposit" in USA or "Fixed Deposit" in India,
have an average rate of 2.5% p.a. in USA.
For an AMC, if they could offer 3% p.a. to customers in US, and invest at ~10% p.a in India DM Govt securities,
What more could they ask for.
All they need to manage is currency fluctuations which can hurt them the most.
Why would one risk large amounts for a dream of 20-30% returns p.a.?
This means even they are aware that this doesn't happen consistently.
Table 1
That leads to a good conclusion,
Scenario 1. FII out of EM and in DM: EM not favourable
Scenario 2. FII out of DM and in EM: EM is favourable
Scenario 3: FII in EM & DM: What Indian economy wants
Scenario 4: FII out of EM & DM: Bad for Indian economy
This is the wisest interpretation.
The bane of DIIs
I say bane, because the way they have been regulated, they have access to the same instruments but not the flexibilty of straight returns that the FII
enjoy like stated in the example above. They have to work harder and perform better.
When standard FDs are around 9%, their DEBT MFs have to be consistent around 11-15%, to attract investors.
FII vs DII
Most of the websites tend to post the NET Daily position of FIIs and DIIs.
The reason I discourage people to look at NET daily positions is bcos it really doesn't make any difference.
Point 1. Yes, it is very important to look at weekly or monthly trends of the NET sell/buy.
You can use Table 1 to interpret the perspective of FII.
Figure out what FII is doing from the four scnarios.
Why do DIIs buy when FIIs are heavily selling-off (& vice-versa), are the DIIs nuts?
The plain answer is a big NO.
Its clear and simple logic, for now I'm considering EM&DM, what people look at NET figures and comment.
Since the FIIs have many markets (from various countries) to choose from, they panic (for lack of a better word) at the first signs of uncertainty.
As they start selling heavily, the lower valuations are great opportunities for DIIs to buy.
Its like buying on dips. Again, DM has far more volumes than EM. More the FIIs sell, happier the DIIs are to get lesser priced DM instruments.
Conversely, when FIIs come back to buy, the DIIs can price it higher and book profits.
That is why most cycles show opposite buying and selling.
If both are selling, its most likely to be bad news of booking profits aand if both are buying then its likely that there is a good run.
What's in for the day trader? Hold on, more posts to come
Originally posted here:
http://www.traderji.com/general-tra...68-general-trading-chat-5005.html#post1198495
http://www.traderji.com/general-tra...68-general-trading-chat-5005.html#post1198497
This is post of yours about market going higher.
There are two types of Markets:
1. DM: Debt Market
2. EM: Equity Market
In each of 1 & 2,
there is
A. Primary Market
B. Secondary MArket
The Market that people generally refer to is 1B, ie. Secondary Equity Market
Only 1B contributes to Nifty and other Indices.
In fact the volume in Crores of DM is generally far more than EM.
Debt Market is mostly Govt Securities etc and not Stocks/Derivatives of you see.
NSDL doesn't disclose such data of DII everyday, maybe deferred data comes by months etc so you'll never know what DII did in detail like FPI.
On 11th January 2017, when you posted that data:
Look at the image below and you will understand actually how
Basically, what I'm trying to say is that the flat figures you post are not reflected on the Indices the way you are projecting.
source: https://www.fpi.nsdl.co.in/web/Reports/Monthly.aspx
nsdl collates all data at EoD.
There are huge possibilities on many days where FII can sell 1000 Cr in DM and invest 600Cr in sec. EM with Nifty jumping 150 pts
and your post will say FII were -400 Cr NET Sellers.
http://www.traderji.com/general-tra...68-general-trading-chat-5005.html#post1198495
http://www.traderji.com/general-tra...68-general-trading-chat-5005.html#post1198497
This is post of yours about market going higher.
There are two types of Markets:
1. DM: Debt Market
2. EM: Equity Market
In each of 1 & 2,
there is
A. Primary Market
B. Secondary MArket
The Market that people generally refer to is 1B, ie. Secondary Equity Market
Only 1B contributes to Nifty and other Indices.
In fact the volume in Crores of DM is generally far more than EM.
Debt Market is mostly Govt Securities etc and not Stocks/Derivatives of you see.
NSDL doesn't disclose such data of DII everyday, maybe deferred data comes by months etc so you'll never know what DII did in detail like FPI.
On 11th January 2017, when you posted that data:
Look at the image below and you will understand actually how
Basically, what I'm trying to say is that the flat figures you post are not reflected on the Indices the way you are projecting.
source: https://www.fpi.nsdl.co.in/web/Reports/Monthly.aspx
nsdl collates all data at EoD.
There are huge possibilities on many days where FII can sell 1000 Cr in DM and invest 600Cr in sec. EM with Nifty jumping 150 pts
and your post will say FII were -400 Cr NET Sellers.
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