The assets under management of country's mutual fund industry plunged for the second straight month in July, falling 1.5 per cent, even as Anil Ambani group firm Reliance Mutual Fund managed to hold on to the gains.

The industry's average assets under management (AUM) fell by

Rs 10,296.15 crore, or 1.52 per cent. The combined average AUM of the 39 fund houses stood at Rs 6,65,567 crore in July.

Over July, Reliance MF, the largest fund house in the country, saw an addition of Rs 859 crore to its average assets at Rs 1.02 lakh crore, data by the Association of Mutual Funds in India (AMFI) showed.

However, the assets of the top fund houses -- HDFC MF, ICICI MF and UTI MF declined during the month on the back of huge withdrawals by corporates and banks.

While the assets of HDFC MF declined by Rs 2,019.89 crore and that of ICICI MF fell by Rs 5,080.31 crore.

At the end of the month, the assets of HDFC MF stood at Rs 84,628.20 crore and ICICI MF's assets were at Rs 68,715.11 crore. Industry experts said that after the market regulator banned the entry load on mutual funds a year back, the number of distributors has gone down and the investment in equity schemes is getting less over time.

"There has been no inflows in equity schemes, instead the industry is seeing huge redemptions," said an executive at a top fund house.

He added that banks are pulling out money from MFs and parking with RBI through the reverse repo route.

Besides, UTI MF saw a decline of Rs 2,238 crore from its assets to Rs 62,207.57 crore during July.

Over the month, the average assets of Kotak Mahindra MF dropped Rs 1,051 crore and that of L&T MF fell Rs 307 crore to Rs 3,386.34 crore.

Experts said that most of the fund houses are now coming up with cheaper products to attract investors and promoting products through advertisements.

"Banks are now getting better returns from Call money rates at about 5.8 per cent, higher than the returns from liquid schemes (5 per cent). As liquidity condition tightens, banks are withdrawing funds from the MFs," they said.

In July, 19 of the 39 fund houses witnessed a decline in their average AUM.

Funds that saw an increase in average AUM include Fidelity MF (Rs 186 crore), Fortis MF (Rs 190 crore), JP Morgan MF (Rs 2,284 crore) and Peerless MF (Rs 156 crore).