How to Buy FII Stocks?

Foreign Institutional Investor (FII) transactions are scrutinized closely by stock analysts and broking houses. This is because FII trading activity influences domestic market trends. A cursory glance at stock indices in the last decade can verify a direct correlation between FII buying and the stock market performance.When FIIs pump money, the stock market usually thrives and plummets once they exit. Given that buying/selling by FIIs results in a sharp rise/fall of prices, following their footsteps can be a rewarding strategy for an individual investor.

There are a few ways that can help an investor gauge which stocks FII is buying. Let’s find out how.

• Analysis of FII Trading Data: FIIs are interested in making a profit. Thanks to strong analytical teams, they invest in fundamentally sound companies based on valuation and growth expectations. A smart investor can take cues from FII activity to make an informed decision.How? The National Stock Exchange (NSE) publishes the FII trading activity daily. An analysis of FII's net investment data can give a feel of their pulse and an indication of their portfolio preferences in the Indian stock market . If FII’s are gradually increasing their holding in a particular company, it makes sense to invest in the same.
• Swings in Volume and Delivery Percentage: It’s no big secret that FII contribution can take the financial market to a new level. They generally tilt towards frontline players of specific domains with good prospects. Sharp swings in the volume and delivery percentage in stocks are largely fuelled by FIIs increasing their stakes. A retail investor can benefit by keeping tabs on FII buying in stock.
• Themes or Sectors for Investment: FII's prefer investing in sectors with prospects of rapid growth and a potential to generate positive returns in the long run. There are a plethora of sectors out there, but currently, foreign investors are bullish on urban consumption, IT, and pharmaceutical stocks. However, the list can change with market dynamics.

The above strategies can give investors a slight edge. However, FII trading activity should not be the lone parameter for investment. It’s important to remember that FII sentiment can change suddenly, which can be baffling for retail investors. The trick is to select quality stock after thorough research and keep a close eye on the market movements.Happy Investing!

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.