Abstract: The present invention relates to a magneto sensitive fluid composition and a process of its preparation. The electrical conductivity of the composition varies reversibly in the presence of an external magnetic field. The composition, which is practically an insulator, starts behaving as a conductor in the presence of a magnetic field. The fluid is basically a magnetrheological composition in which the magnetic sensitive particles are admixed with conductive additives in the form of conductive metallic or non-metallic powder. The change in electrical conductivity of the composition is in addition to the change in rheological characteristics of the composition in the presence of an external magnetic field.