In what must have come as a pleasant surprise even to Unit Trust of India (UTI), its equity schemes have posted inflows of Rs 6 bn over the period July-December 1999. Inflows over the same period last year were only Rs 320 m.

UTI, with assets in excess of Rs 658 bn as on 30th November 1999, is India's largest mutual fund (MF). It accounts for 71% of India's MF segment.

While fresh sales are on the upswing, they are being matched closely by redemptions, so net inflows are not very significant. However as rightly pointed out by B. G. Daga, 'The positive side of the story is that investors are once again flocking towards (UTI's) equity schemes.'

According to a news report in a leading financial daily, approximately 75% of fresh sales (about Rs 4 bn) have been invested in five sector-specific schemes launched in May 1999. Commenting on the high redemptions, Daga remarked, 'This was bound to happen this year considering that the net asset values (NAVs) of many equity schemes have risen sharply.' The NAVs have appreciated in a big way in response to the ongoing rally at the bourses.

However, increase in inflows has not stemmed UTI's loss of market share, which has plunged from 82.6% last year to 71.3% at present. As more private funds enter the mutual fund arena, market shares of the leading players (currently UTI) will come under some pressure. And as funds launch more schemes, investors will have a range of options to choose from. This is in stark contrast to the scenario a couple of years ago, when the investors only had UTI's staid offerings.

As the insurance sector is liberalised, MFs with links to insurance majors (e.g. Alliance Capital, Birla Sun Life, Prudential-ICICI) will try to bundle insurance products with their schemes. Moreover, with derivatives trading on the anvil, the new vistas open to the MF industry are mind-boggling.

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