The following are few parameters for retail investors if they are following FII invested stocks.
Positives - • Institutional investors have dedicated and highly qualified research teams and typically pick stocks with growth potential ahead of smaller players.
• Large investors typically take a medium to long-term view on stock markets.
• Good for short term traders, who can participate in the extra liquidity created by entry or exit of FIIs.
Negative - • Can lead to a herd mentality and push up valuations. A retail investor might end up buying stocks, which are the current favourites of institutions and at the peak of their historical valuations.
• Global issues could force FIIs to sell local equities, regardless of fundamentals or growth prospects of companies.
• Financial goals of individual and institutions may not always same.
• Buying or selling by a fund could be a part of there hedging, diversification, trading or buy-and hold strategy. Retail investors may not be privy to this.
• The risk profile and investment horizon of big players may vary compared to retail investors
Positives - • Institutional investors have dedicated and highly qualified research teams and typically pick stocks with growth potential ahead of smaller players.
• Large investors typically take a medium to long-term view on stock markets.
• Good for short term traders, who can participate in the extra liquidity created by entry or exit of FIIs.
Negative - • Can lead to a herd mentality and push up valuations. A retail investor might end up buying stocks, which are the current favourites of institutions and at the peak of their historical valuations.
• Global issues could force FIIs to sell local equities, regardless of fundamentals or growth prospects of companies.
• Financial goals of individual and institutions may not always same.
• Buying or selling by a fund could be a part of there hedging, diversification, trading or buy-and hold strategy. Retail investors may not be privy to this.
• The risk profile and investment horizon of big players may vary compared to retail investors
