Post Liberalization Evidence of Market Concentration and Competition in Indian Mutual Fund Industry

The Indian mutual fund industry began with the inception of Unit Trust of India (UTI) in 1964, which enjoyed complete monopoly till the public sector banks and financial institutions were allowed to enter the industry. Further with the adoption of the policy of liberalization, private and foreign sector fund houses were allowed entry which induced an element of competition in the Indian mutual fund industry. Since then the industry has witnessed entry and exit, mergers and acquisitions of several mutual fund companies and the structure of the industry has changed drastically in the post-liberalization period. This study attempted to analyze market concentration and competition in the Indian mutual fund industry during 2002-03 to 2016-17. The findings of the study make it evident that with the increase in the number of mutual fund companies, the level of concentration declined. Measures of concentration such as CR3 and CR5 ratios as well as Herfindahl-Hirschman Index were used and the results of concentration ratios revealed that there is market competitiveness in the Indian mutual fund industry and the industry is said to have medium concentration and the structure of the industry in oligopolistic in nature. While results of HHI indicate that an unconcentrated market condition prevails in the Indian mutual fund industry.