Mutual funds, insurers such as LIC, banks and pension funds including the National Pension System (NPS) are institutions based in India that invest large pooled sums of money in Indian markets, and the market groups them together as one class of investors.
This group is the answer to the question of what is DII in the share market, and the full name is domestic institutional investor (DII). The label is market usage, and it is not a category defined in SEBI is the statutory regulator of India's securities market, with the legal duty to protect investors and to promote and regulate that market. Read the full meaning of SEBI regulations.
The money these institutions invest is pooled domestic money, collected from many Indian investors and invested together on their behalf.
How the daily figure is reported
The figure most of the investors follow is the net DII flow, which is gross purchases minus gross sales by these institutions in the cash segment, shown in Rs crore. It is reported alongside the figure for foreign institutional investors (FII).
NSE and BSE publish provisional figures after the market closes on each trading day. The final FPI data from SEBI and the National Securities Depository Limited (NSDL) also covers the primary market and bulk deals, so the two sets of numbers can differ slightly.
If the DIIs buy shares worth Rs 10,000 crore in a day and sell shares worth Rs 8,000 crore, the net DII flow is Rs 2,000 crore bought.
Why DII flows matter, and DII vs FII
Market reports use the term "DII absorption" for the share of FII selling that is offset by buying from the domestic institutions. Reports on this measure say the market can stay steady when foreigners sell heavily, as the domestic buying covers a part of that selling.
Foreign portfolio investors are subject to limits on holdings in each company, such as the 10% limit for one investor group, and these limits do not apply to domestic institutions in the same way.
The FII label is still used loosely. However, in 2014, SEBI had merged the FIIs, their sub-accounts and qualified foreign investors (QFIs) into a single category of foreign portfolio investors (FPIs), so the foreign side in any DII comparison is effectively the FPIs.