Institutional investors, such as mutual funds, pension funds, insurance companies, and hedge funds, manage large sums of money and invest in the stock market on behalf of their clients.
Their role is crucial in providing stability, liquidity, and price efficiency to the market. Since they trade in high volumes, institutional investors influence stock prices and market trends.
Their research-driven investment decisions often signal confidence in a company's prospects, impacting retail investor sentiment.
Additionally, they promote corporate governance by engaging with companies on management and policy decisions.
Their participation strengthens market depth, ensuring efficient price discovery and long-term growth.
Related Articles
What is market timing, and does it work for stock investors?
Market timing is an investment strategy in which individuals attempt to forecast future market trends to determine the most advantageous moments to buy or sell stocks. The goal is to maximize returns by purchasing shares at their lowest prices and ...
What is the role of credit rating agencies in the stock market?
Credit Rating Agencies (CRAs) play a crucial role in India's financial markets by evaluating the creditworthiness of companies, government securities, and debt instruments. Their ratings help investors assess risk, influencing both debt and equity ...
Who are the key participants in the stock market?
The stock market is a vast ecosystem with different participants playing essential roles in its functioning. These include investors, stock exchanges, regulators, brokers, and companies. Investors – Investors are individuals or institutions that buy ...
What are market makers in the stock market?
Market makers are entities that buy and sell stocks continuously to provide liquidity and ensure smooth trading. They help reduce price volatility by offering both buy and sell quotes, making it easier for investors to execute trades without delays. ...
How can investors hedge their stock investments?
Hedging is a strategy used to reduce potential losses by taking an offsetting position in a related asset. Investors hedge their stock investments to protect against market downturns while still staying invested. Common Hedging Strategies: Put ...