It's commonly believed that the stock market goes up when FPI's, FII's and DII's pump in their investment and it goes down when they book profits. Among the two, FPI and DII, investors give more weight age to how FPI's or FII's are behaving in the market. A positive net investment by FPI is considered a bullish signal and a negative net investment by FII is considered bearish. Stock researchers, stock analysts and broking houses watch FPI trading data or FII trading data very keenly. While it's true that FPI investment data or FII investment data in India influences the stock market, the correlation is not one to one. The amount of influence FPI investment in equity or FII investment in equity has on the stock market is debatable, but one cannot ignore the financial muscle of these players for sure. Keeping their financial power in mind, it does make sense to follow the footsteps of FPI's and FII's. As we all know, FIIs are not interested in managing the company and they only seek the part of profit the company makes. This is possible only in one condition i.e. they invest in fundamentally good companies and hence their investment decisions are backed by deep analysis. As a smart investor, one can analyse the net investment data of FPI or FII on a daily (for short term traders) and monthly (for investors) basis to gauge overall FPI sentiment or FII sentiment about Indian stock market. Please see the FPI investment chart below which presents FPI net investment data or FII net investment data on a daily basis together with Nifty levels. The data source is NSDL website (https://www.fpi.nsdl.co.in/web/Reports/Latest.aspx) which publishes the consolidated data using inputs from http://nseindia.com/ and SEBI. We encourage the investors to track this data as it will help them in taking more informed investment decisions.
Investors with a long term perspective should focus more on FPI monthly market activity data or FII monthly activity data. If the FPI investment or FII investment is growing month on month, it’s a very bullish sign and if it’s decreasing on a monthly basis, it’s a very bearish sign. Please find below the FPI monthly investment chart which investors can study to take long term investment decisions.
If you want to read more about this topic, you can read our article How to benefit from FII activity in stock Market
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