What It Means
DII stands for Domestic Institutional Investor, an India-based entity like a mutual fund house, an insurance company such as LIC, a bank, or a pension fund, investing money raised from within India. DIIs are the domestic counterpart to FIIs, and their daily buying and selling gets tracked alongside FII activity as the other half of institutional flow.
How It Works
A large part of DII buying comes from something steady: monthly SIP inflows into equity mutual funds. Retail investors across the country contribute a fixed amount every month regardless of what the market is doing that day, and fund managers deploy that money into the market on a rolling basis. That steady inflow is one reason DIIs can keep buying through a period when FIIs are net sellers, acting as a cushion rather than adding to the fall.
Warning
FII and DII flows don't always move in opposite directions. Both can buy or both can sell on the same day. The "DII offsets FII" pattern shows up often, but it isn't guaranteed, and reading a single day's numbers in isolation can be misleading.