Top Performing Arbitrage Funds
Ranked by 3-Year CAGR performance across Direct Growth plans from verified AMC filings.
| Scheme Name & AMC | Rating | AUM (₹ Cr) | 1Y Return | 3Y CAGR | 5Y CAGR |
|---|---|---|---|---|---|
Tata Arbitrage Fund Tata Mutual Fund | 5 | ₹24,539 | +6.79% | +7.47% | +6.91% |
Invesco India Arbitrage Fund Invesco Mutual Fund Pvt | 5 | ₹30,618 | +6.86% | +7.47% | +7.13% |
Kotak Arbitrage Fund Kotak Mahindra Mutual Fund | 4 | ₹75,275 | +6.76% | +7.46% | +6.99% |
Aditya Birla SL Arbitrage Fund Aditya Birla Sun Life Mutual Fund | — | ₹27,237 | +6.75% | +7.42% | +6.86% |
Edelweiss Arbitrage Fund Edelweiss Mutual Fund | 3 | ₹14,250 | +6.70% | +7.40% | +6.95% |
Mirae Asset Arbitrage Fund Mirae Asset Investment Managers (India) | 2 | ₹3,571 | +6.75% | +7.37% | +6.81% |
Axis Arbitrage Fund Axis Mutual Fund | 4 | ₹10,168 | +6.70% | +7.35% | +6.87% |
UTI Arbitrage Fund UTI Mutual Fund | 3 | ₹10,900 | +6.64% | +7.33% | +6.77% |
Nippon India Arbitrage Fund Nippon Life India Mutual Fund | 3 | ₹17,216 | +6.74% | +7.31% | +6.85% |
Bandhan Arbitrage Fund Bandhan Mutual Fund | 4 | ₹7,745 | +6.50% | +7.31% | +6.80% |
ICICI Pru Arbitrage Fund ICICI Prudential Mutual Fund | — | ₹35,576 | +6.64% | +7.31% | +6.79% |
Baroda BNP Paribas Arbitrage Fund Baroda BNP Paribas Mutual Fund India | 3 | ₹1,015 | +6.36% | +7.30% | +6.67% |
HDFC Arbitrage Fund HDFC Mutual Fund | 3 | ₹25,407 | +6.66% | +7.30% | +6.74% |
SBI Arbitrage Fund SBI Funds Management | — | ₹46,309 | +6.59% | +7.28% | +6.85% |
Sundaram Arbitrage Fund Sundaram Mutual Fund | 2 | ₹539 | +6.83% | +7.25% | +6.47% |
SEBI Mandate & Category Classification
Arbitrage mutual funds generate returns by simultaneously buying a stock in the cash (spot) market and selling it in the futures (derivatives) market to lock in risk-free price differentials (spreads). Because every position is completely hedged, they have virtually zero market directional risk while retaining equity taxation.
Category Highlights
- Virtually zero equity market risk through fully hedged spot-futures positions
- Enjoys equity taxation (12.5% LTCG / 20% STCG) vs 30%+ slab rate on Bank FDs
- Superior post-tax returns for individuals in 20% to 30%+ tax brackets
Taxation Rules (Post-Budget 2024)
Equity Taxation: Taxed as an equity scheme (LTCG 12.5% above ₹1.25L for > 12 months, STCG 20% for ≤ 12 months). Far more tax-efficient than Bank FDs or Debt Funds taxed at slab rates (up to 30%+ surcharge).
Who Should Invest?
- •Investors in the 30% or 39% income tax bracket looking for a tax-efficient alternative to Bank FDs or Liquid Funds.
- •Parking emergency funds or surplus cash for 6 to 24 months with capital protection.
- •Conservative investors wanting zero equity market volatility.
Risks to Consider
- •Arbitrage spread compression during periods of low market volatility or declining interest rates.
What if you invest ₹10,000/month in Arbitrage Funds?
Projected wealth growth assuming a category benchmark CAGR of 7% compounded monthly:
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Compare asset classes, risk-return profiles, and SEBI regulations across all fund categories in India.
Frequently Asked Questions: Arbitrage Funds
How do Arbitrage Funds make risk-free profits?
They exploit temporary price differences between the cash market and the futures market. By buying in cash and simultaneously selling in futures, the spread is locked in until expiry regardless of market direction.
Why are Arbitrage Funds better than Bank Fixed Deposits for high earners?
Bank FD interest is taxed at your slab rate (up to 30-39%). Arbitrage funds are taxed as equity (20% short-term or 12.5% long-term over ₹1.25L), yielding substantially higher post-tax cash.
Can Arbitrage Funds give negative returns?
While NAV can have minor 1-2 day fluctuations around derivatives expiry, monthly and quarterly returns are almost always positive.
What is the ideal holding period for Arbitrage Funds?
From 3 months to 2 years. They are ideal for parking funds earmarked for advance tax, down payments, or short-term financial goals.