Indian mutual funds' assets under management grew Rs 860 billion in July to a corpus of Rs 4.89 trillion driven by a large number of new fund offerings, a sharp rally in the equity markets and liquid fund inflows.

Reliance [Get Quote] Mutual Fund topped the AUM chart with its AUM in excess of Rs 660 billion, while ICICI [Get Quote] Prudential Mutual Fund came second with an AUM of Rs 487 billion.

UTI Mutual Fund was in the third spot with its AUM at Rs 425 billion.

In the secondary market, mutual funds were net sellers to the extent of Rs 9 billion in July, after being net buyers of Rs 7 billion in June.

"Growth of this magnitude in a single month has rarely been seen in the Indian mutual fund industry," said Krishnan Sitaraman, head, Fund Services and Fixed Income Research, Crisil, in a statement issued in Mumbai on on Tuesday.

All of Crisil's fund indices ended positive for the fourth successive month in July and returns were higher than in June, mainly due to robust market performance, Crisil said.

It also pointed to the fact that in July the Cabinet Committee on Economic Affairs allowed navaratnas and mini-ratnas in the public sector to invest up to 30 per cent of their surplus funds in public sector equity MFs.

"As a result, after a nine-year gap, these organisations can again invest in equity mutual funds," Crisil said, adding "the move could result in investment flows of Rs 600 billion into the sector from cash-rich public sector undertakings."