The past few months haven't been the best of times for the Unit Trust of India (UTI), India's largest mutual fund. UTI has witnessed an erosion in its market share, as investors have spurned it in favour of other fund houses.

As per the latest figures (November 2000) available from the Association of Mutual Funds in India (AMFI), UTI's net assets amount to Rs 649.7 bn, which accounts for 65.3% of the total net assets in the mutual fund industry. Not so long ago in July 2000, UTI's net assets at 692.0 bn accounted for over 67% market share of the industry. So in a period of 4 months, UTI's net assets have dived by over Rs 42 bn and market share has slumped by nearly 2%.

AMFI Monthly November 2000

There are several reasons associated for this decline. One of this is the premature termination of the Rajlakshmi Scheme, which saw some investors exiting UTI in favour of other fund houses. Another reason behind the decline is the improved performance posted by private funds combined with aggressive marketing, which has succeeded in pulling fresh investments, even if the old investors have chosen to remain with UTI.

A matter of concern for UTI is that there are no signs as yet of a reversal in its fortunes. The erosion in market share has set in and it is gradually surrendering its lead to other fund houses. Many feel that in the long run it will settle for a market share of below 50% and it is only a matter of time before it gets there.

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