Arbitrage Mutual Funds in India
Updated June 2026 · 55 active funds · data from AMFI NAVs · benchmark: NIFTY 50 Arbitrage Index
Arbitrage funds are SEBI-defined hybrids that aim to profit from price differences between the cash (spot) and derivatives (futures) markets for the same security. The manager simultaneously buys a stock in the cash market and sells its futures, locking in the spread, so returns come from market structure rather than from the direction of share prices. Because every equity position is hedged, these funds carry low directional equity risk and have historically shown returns and volatility closer to short-term debt funds than to equity funds — though returns depend on how wide arbitrage spreads are, which varies with market conditions and can be thin in quiet markets. Crucially, despite that bond-like behaviour, they hold 65% or more in equity (the hedged positions count as equity), which gives them equity taxation. Investors often use them as a tax-efficient alternative to liquid or short-duration debt funds for parking money over short horizons. FindMF benchmarks this category against the NIFTY 50 Arbitrage Index and computes returns, volatility and Sharpe from AMFI daily NAVs using its disclosed methodology.
Who it suits: Investors parking money short-term who want low-volatility, equity-taxed returns instead of a debt fund taxed at slab rate.
31% of the 35 funds here with a computed alpha beat their benchmark over the measured window (positive alpha). Past performance is not indicative; this is analysis, not advice.
| # | Scheme | 1Y | 3Y | 5Y | Sharpe | Max DD | TER | AUM |
|---|---|---|---|---|---|---|---|---|
| 1 | Kotak Arbitrage Fund Kotak Mahindra | +6.59% | +7.67% | +6.81% | - | -0.3% | 0.38% | ₹70.8K Cr |
| 2 | Tata Arbitrage Fund Tata | +6.67% | +7.66% | +6.73% | - | -0.3% | 1.55% | ₹20.7K Cr |
| 3 | Invesco India Arbitrage Fund Invesco | +6.71% | +7.65% | +6.89% | - | -0.2% | 1.31% | ₹27.9K Cr |
| 4 | Edelweiss Arbitrage Fund Edelweiss | +6.56% | +7.61% | +6.78% | - | -0.2% | 1.60% | ₹15.5K Cr |
| 5 | Aditya Birla Sun Life Arbitrage Fund Aditya Birla Sun Life | +6.58% | +7.60% | +6.68% | - | -0.3% | 0.31% | ₹26.2K Cr |
| 6 | Mirae Asset Arbitrage Fund Mirae Asset | +6.59% | +7.56% | +6.63% | - | -0.3% | 1.65% | ₹3.8K Cr |
| 7 | ITI Arbitrage Fund ITI | +6.63% | +7.54% | +6.06% | - | -0.3% | 2.74% | ₹54 Cr |
| 8 | UTI Arbitrage Fund UTI | +6.49% | +7.52% | +6.59% | - | -0.3% | 1.64% | ₹10.8K Cr |
| 9 | Axis Arbitrage Fund Axis | +6.53% | +7.51% | +6.69% | - | -0.3% | 1.74% | ₹8.9K Cr |
| 10 | BARODA BNP PARIBAS ARBITRAGE FUND Baroda BNP Paribas | +6.42% | +7.51% | - | - | -0.3% | 1.35% | ₹1.3K Cr |
| 11 | BANDHAN Arbitrage Fund Bandhan | +6.35% | +7.50% | +6.62% | - | -0.3% | 1.25% | ₹8.6K Cr |
| 12 | Nippon India Arbitrage Fund Nippon India | +6.57% | +7.49% | +6.67% | - | -0.3% | 1.29% | ₹16.4K Cr |
| 13 | ICICI Prudential Equity Arbitrage Fund ICICI Prudential | +6.44% | +7.49% | +6.60% | - | -0.3% | 0.40% | ₹32.6K Cr |
| 14 | SBI Arbitrage Opportunities Fund - Direct Plan - Gr SBI | +6.50% | +7.49% | +6.73% | - | -0.3% | 0.40% | ₹24.4K Cr |
| 15 | HDFC ARBITRAGE FUND - Wholesale HDFC | +6.52% | +7.48% | +6.54% | - | -0.8% | 1.51% | ₹24.5K Cr |
| 16 | HDFC ARBITRAGE FUND HDFC | +6.39% | +7.44% | +6.52% | - | -0.8% | 1.51% | ₹0 Cr |
| 17 | HSBC Arbitrage Fund HSBC | +6.44% | +7.41% | - | - | -0.3% | 1.43% | ₹2.5K Cr |
| 18 | DSP Arbitrage Fund DSP | +6.40% | +7.40% | +6.52% | - | -0.3% | 1.31% | ₹6.9K Cr |
| 19 | Sundaram Arbitrage Fund (Formerly Known as Prinicpal Arbitrage Fund) Sundaram | +6.67% | +7.38% | - | - | -0.2% | 0.31% | ₹136 Cr |
| 20 | Union Arbitrage Fund Union | +6.30% | +7.35% | +6.37% | - | -0.3% | 0.92% | ₹279 Cr |
Ranked by trailing return (3Y where available, else 1Y) on funds with at least one year of history. Returns, Sharpe, drawdown and TER are computed independently from AMFI NAVs - see methodology. No paid placement.
Frequently asked questions
How are Arbitrage funds taxed?
Even though they behave like low-risk debt funds, Arbitrage funds hold 65% or more in equity (via hedged positions), so they get equity taxation: 20% short-term on units held under 12 months, and 12.5% long-term on units held 12 months or more, on gains above Rs 1.25 lakh per year. This is the main reason higher-bracket investors prefer them over liquid or short-duration debt funds, which are taxed at slab rate.
What is a reasonable expense ratio, and how should I compare Arbitrage funds?
Since gross returns are modest and cluster tightly across funds, cost is one of the biggest differentiators — direct plans often run under 0.5%, and a small TER gap can meaningfully change net return. Compare direct plans on expense ratio first, then on consistency of returns and volatility. FindMF lets you sort active Arbitrage funds by TER and risk-adjusted return computed from AMFI NAVs.
Are returns from Arbitrage funds guaranteed?
No. Returns depend on the size of cash-futures spreads, which widen and narrow with market activity and tend to compress in low-volatility periods. While directional equity risk is hedged away, returns can dip in quiet markets, and there can be brief periods of negative NAV movement. They are lower-risk, not risk-free.
Which benchmark does FindMF use, and how liquid are these funds?
The default benchmark is the NIFTY 50 Arbitrage Index. Most arbitrage funds are open-ended and offer reasonable liquidity, though some apply a short exit load (often a few days to a month), so check the fund's exit-load terms before short parking. FindMF computes returns and risk metrics against the benchmark from AMFI NAVs over the available history.