What It Means
FII stands for Foreign Institutional Investor, a foreign entity, think a mutual fund based in the US, a pension fund in Singapore, or a hedge fund in London, registered with SEBI to buy and sell securities in Indian markets. When financial news reports that "FIIs sold ₹X crore worth of equities today," it's describing the combined activity of every registered foreign fund trading in India that session.
How It Works
NSE and BSE publish provisional FII and DII trading data every evening after the market closes, split into equity and debt segments. Because FIIs often move large sums relative to a single day's total trading volume, a sustained streak of FII buying or selling gets read by traders as a signal of how foreign money views Indian markets right now, separate from what retail or domestic investors are doing. Heavy FII buying tends to support an uptrend by adding real demand; heavy FII selling adds real supply and can accelerate a fall that's already underway.
Warning
FII selling on a given day doesn't automatically mean the market will keep falling. Domestic Institutional Investors (DIIs) often buy into FII selling, and a single day's flow number says nothing on its own about the trend over the following weeks.