How do FII and DII know who among them are buying or selling?

General
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We all know that whenever FII is selling, DII buys and whenever FII is buying, DII sells. This is already evident from daily FII DII data.

But how do they know that the other party is buying or selling? How do DII know that FII are selling, so lets buy and vice versa.

From the daily data, it sure looks that FII and DII behave like cartels, always taking the opposite trade, but how do they understand what the opposite party is doing?

There are so many FII and DII, surely the DII HDFC MF won’t be calling and checking with all other DII MF houses, LIC to know if they are selling or buying, then collate this information from all, understand that no DII is selling so it must be FII selling, so all the DII jump into taking the opposite trade and start buying. You get my point, what I am trying to say.

How do they understand who is buying or selling?

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I do not think there is any connection or coordination between FII and DII. When FII sell, for many reasons such as liqudity being tapered off etc, there would be a downward pressure on the stock which becomes attractive to others who will buy. The others include DII. This is all there is to it. When FII start selling and if the price is not ok for others, there will be a lul in buying and hence price will fall more. This is pure market at play and I do not think there is any link between these two.

FII, DII or Retail Investors decision to buy and sell will be solely based on their strategy. There could be a DII who must have bought in huge quantity in March 2020 and sitting on huge profits and hence to ensure asset allocation, he would be selling the stock. Similarly retail investor, if a stock has achieved their targeted price, they will take profits off the table. FII could be selling and booking profits to invest in other stocks where they are underweight or see higher potential.

Take SBI for that matter, it went upto 450 to 460 when the results where announced, some one was buying more than selling and hence price moved up. Once the results were announced many would have started selling and now the price is back at 410 level. All participants must have bought and sold.

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But how do they know that the other party is buying or selling? How do DII know that FII are selling, so lets buy and vice versa.

mostly taking the opposite trade, but how do they understand what the opposite party is doing?

Ya this makes me wonder always

@nithin Could you shed some light

Order book doesn’t give full picture.

Market orders only move the price not limit orders.

So how do they balance the figures without affecting its day’s trend

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This is an interesting puzzle yet a bit incomplete as it only covers two players out of the 4.

Here are the 4 players who play a key part in the daily activity of markets. (FIIs, DIIs, Pros and Clients)

Screenshot from 2025-03-21 08-24-07
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Source: Sensibull

Note: There are a few more key players like Govt. & Promoters etc. but we can ignore them for now)

Our General Misconception

  • Generally, Most of the traders are wired to study and mainly focus on FII & DII cash data and arrive at a conclusion about whether markets are bullish are bearish. Even in this, We only have data from 2 players out of 4.

  • More importantly, This is related to the cash market whose outcome of profits or losses is medium-term in nature generally. While there is some indication of the trend, it is almost negligible.

What should a trader keep an eye on

  • For a trader, It makes sense to focus more on F&O data to get more clarity on short-term trend.

We have started sharing @Sensibull’s overnight analysis of F&O and overall market analysis on TradingQ&A. In my opinion, Abid’s incredible insights are super handy for a trader :slight_smile:

The Original Question - What’s the secret between the FII & DII coordination in Cash Market ?

While knowing the exact mechanism as to how this works is not so easy, In my opinion, two key factors that i can think of right now, might determine this :

1. The general strategy of FIIs and DIIs. Over the years, We have seen FIIs are momentum players who buy high and sell low and DIIs follow the contrarian style where they sell when the market is higher and buy when there is a fall.

A key point to be noted here is that as there are many players in both FIIs and DIIs, it doesn’t make sense to make simplistic conclusions like all FIIs are bullish and all DIIs are bearish. If there is an FII whose bullish view matches the bearish view of another DII, the coordination that we are talking about might happen.

2. The role played by other players like Clients & Pros. The numbers contributed by these players in both cash and F&O markets help in balancing the figures without affecting the day’s trend as you rightly asked.

To give you an example of this, We will see that many a times, Markets will see a 2% fall, but FII and DII net sell and buy figures are negligible. so what might have caused the fall? The activity of FIIs, Pros, and Clients in the F&O segment.

That being said, this is a nice topic to dig further deeper into, We will research a bit more on this and share if we find anything interesting.

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That being said, this is a nice topic to dig further deeper into, We will research a bit more on this and share if we find anything interesting.

Pls do

I feel DII provide passive support most of the times.

Most of DII/FII orders go through BROKER-DEALER network

That being said ; Thanks

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I think both the FII"s & DII"s talk to each other before buying and selling , after all both the party"s are sailing in the same boat :slightly_smiling_face:

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On the Topic of FIIs selling and DIIs buying or vice-versa, I came across this article, it’s an interesting read.

Some excerpts from it:

Investing is not about bravery. It is about capital preservation at its core. But in our twisted, warped investing marketing in India, taking bullets, arrows, and even mortar shells became substitutes for common sense. When you see a tsunami coming over the sea, you don’t stick around hoping to get a free cocktail at the beach bar’s happy hour. You beat it. Fast

Two exit liquidity streams - derivatives and equities - collectively represent the single largest transference of wealth from the poor to the rich in all economic history.

We have given FIIs, knife-through-butter exits, month after month, year after year. We have extracted no price from them. We have let them have free iced Martini lunches at the expense of our hot money forex reserves

If dollar wants an exit, it has to get a Greater Fool with Greater Dollars. That’s the only way this economic mechanism of foreign capital into poor countries works. Dollar convinces dollar. Net net: no net dollar outflow

But instead of “FIIs-wanting- to- exit- having- to- fool- another-FII-to- buy”, our great Indian Unwashed has taken up this role of the Greater Fool.

A whole industry of cheerleaders led by the mutual funds, lubricated by distributors of these funds, commandeered by politicians, and with the financial media providing the mawkish cheesiness, the deshbhakti ka naara, have collectively generated a paradisiacal vision of permanently rising stock prices, in which the bad guys - FIIs - sell their crown jewels, to the good guys - Indian retail. The underlying message: FIIs are idiots. Indian janta is genius.

Any attempt by anybody to inject anything remotely resembling a counter perspective - “Maybe FIIs aren’t idiots. Maybe they see something our investors in Jodhpur can’t” - is surgically eliminated by our financial media