MUMBAI—A Morgan Stanley investment fund has reduced the valuation of its holding in Flipkart Internet Pvt. by 38%, as India's leading e-commerce faces increased competition from U.S. rival Amazon.com Inc. and others.

In a U.S. regulatory filing this week, the Morgan Stanley Select Dimensions Investment Series fund said for the quarter ended Sept. 30, it held 1,969 Flipkart shares, which it valued at $102,644, or $52.13 a share.

For the preceding quarter, the fund reported the same number of shares in the startup, but valued them at $165,967, or $84.29 a share

In a statement, a Flipkart spokeswoman said the Morgan Stanley fund's markdown was a "purely theoretical exercise" that is "not based on any real transactions."

The spokeswoman also said that Flipkart is "seeing a strong traction in our business momentum and operating performance."

Flipkart, which was founded in 2007, has for years been India's top online seller of goods ranging from smartphones to cooking utensils to clothing.

Investors like U.S.-based Tiger Global Management have poured funds into the Bangalore-based firm, pushing its valuation as high as $15 billion on optimism India's internet economy will take off the way China's did.

But Amazon has been piling on the pressure of late as it seeks growth in the country of more than 1.2 billion, where growing numbers of consumers are going online for the first time via inexpensive smartphones.

Amazon founder Jeff Bezos has pledged to spend billions of dollars to score with Indian consumers by increasing advertising and expanding its network of warehouses.

Analysts say Amazon is stealing market share from Flipkart.

This isn't the first time Flipkart has suffered a cut in its valuation.

Earlier this year, three funds with small stakes in the company slashed as much as 23% off the value they gave their holdings.

Write to Corinne Abrams at corinne.abrams@wsj.com and Newley Purnell at newley.purnell @wsj.com

(END) Dow Jones Newswires

November 30, 2016 12:35 ET (17:35 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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