<p>Recent turbulence in the <span class="key-term" data-definition="Indian equity markets — stock exchanges where shares of Indian companies are listed and traded, reflecting corporate performance and investor confidence (GS3: Economy)">Indian equity markets</span> has prompted a noticeable shift in investment behaviour. While <span class="key-term" data-definition="Foreign Portfolio Investors — non-resident investors who invest in Indian securities through the portfolio route, influencing capital flows and market sentiment (GS3: Economy)">FPIs</span> continue to withdraw funds, domestic participants are reallocating capital towards relatively safer <span class="key-term" data-definition="Fixed income assets — investment instruments like government bonds and corporate debentures that provide regular interest payments and lower risk (GS3: Economy)">fixed income assets</span> and <span class="key-term" data-definition="Commodities — raw materials such as metals, energy, and agricultural products traded on exchanges, often used for hedging inflation (GS3: Economy)">commodities</span> to hedge against rising <span class="key-term" data-definition="Market volatility — rapid and unpredictable price fluctuations in financial markets, indicating heightened risk (GS3: Economy)">market volatility</span>.</p>
<h3>Key Developments</h3>
<ul>
<li><strong>₹1.9 lakh crore</strong> has been pulled out by <span class="key-term" data-definition="Foreign Portfolio Investors — non-resident investors who invest in Indian securities through the portfolio route, influencing capital flows and market sentiment (GS3: Economy)">FPIs</span> from Indian equities over the past <strong>four months</strong>.</li>
<li>Domestic investors are increasingly favouring <span class="key-term" data-definition="Fixed income assets — investment instruments like government bonds and corporate debentures that provide regular interest payments and lower risk (GS3: Economy)">fixed income assets</span> such as sovereign bonds and corporate debentures.</li>
<li>Parallel growth in demand for <span class="key-term" data-definition="Commodities — raw materials such as metals, energy, and agricultural products traded on exchanges, often used for hedging inflation (GS3: Economy)">commodities</span> as a hedge against inflation and currency risk.</li>
</ul>
<h3>Important Facts</h3>
<ul>
<li>The outflows represent a significant <span class="key-term" data-definition="Capital outflows — the movement of funds out of a country, which can affect currency stability and investment climate (GS3: Economy)">capital outflow</span> pressure on the equity segment.</li>
<li>Domestic portfolio reallocation is driven by expectations of a flatter yield curve and the search for stable returns.</li>
<li>Higher <span class="key-term" data-definition="Market volatility — rapid and unpredictable price fluctuations in financial markets, indicating heightened risk (GS3: Economy)">volatility</span> in equities has eroded risk