Best Arbitrage Mutual Funds

Arbitrage fund is a type of mutual fund that has the characteristic of having low-risk and working well in an unstable or volatile market. When there is a price difference for a particular share, in the cash market (Or spot market) and the future market (Or derivatives market), arbitrage funds act as an advantage by using the price difference as their profit.

The best arbitrage funds buy from the cash market for a low price and sell in the future market for a higher price, and hence use the stock markets volatility to the advantage of the investors.

Greater the uncertainty and instability in the market, greater is the profit for the investors. The fund manager handles the hard-earned money of the investors with the utmost safety.

In an arbitrage fund, the fund manager earns profit for the investor by simultaneously buying shares in the cash market and selling it in the derivatives market. Essentially, the difference between the cost and selling price is the return earned by the investors.

Here’s an example to understand how best arbitrage funds in India work - – A company’s stock is trading at Rs. 2000 in the cash market and Rs. 2500 in the derivatives market. Therefore, when investors buy the share from cash market and sell in the derivatives market, simultaneously, they earn a profit of Rs.500 per share. To earn a consistent gain, arbitrage funds need to execute a large number of trades each year.

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Top 10 Arbitrage Mutual Funds

Fund NameCategoryRisk1Y ReturnsRatingFund Size(in Cr)
Reliance Arbitrage FundHybridModerately Low7.0%5star9,497
Edelweiss Arbitrage FundHybridModerately Low7.0%4star3,854
Axis Enhanced Arbitrage FundHybridModerate6.7%4star2,532
Kotak Equity Arbitrage FundHybridModerately Low6.7%4star16,198
IDFC Arbitrage FundHybridModerately Low7.0%4star10,891
BNP Paribas Arbitrage FundHybridModerately High6.7%3star662
L&T Arbitrage Opportunities FundHybridModerately Low6.5%3star801
Invesco India Arbitrage FundHybridModerately Low6.6%3star234
Franklin India Equity Savings FundEquityModerately High6.4%3star270
Indiabulls Arbitrage FundHybridModerately Low6.6%3star38
UTI Arbitrage FundHybridModerately Low6.8%3star2,915
Aditya Birla Sun Life Arbitrage FundHybridModerate6.9%3star5,150
UTI Equity Savings FundEquityModerately High5.4%3star267
ICICI Prudential Equity Arbitrage FundHybridModerate6.7%3star13,392
DSP Arbitrage FundEquityModerately Low7.2%3star810
View All Top 10 Arbitrage Mutual Funds

Features of Arbitrage Mutual Fund

The main purpose of best arbitrage mutual funds is to provide greater returns to investors who look for a low-risk investment. The market price is often fluctuating and investors fear to lose their money, but these funds do not let market uncertainty and instability affect the investments and returns of the investor, rather prove it to be a blessing for them.

Best performing arbitrage mutual funds give the benefits of exposure to equity, while, avoiding any kind of risk. In cases where there is low arbitrage opportunity, the funds are managed to be kept in line with the expectations by fund manager when he allocates the remaining asset in other income-generating instruments that have high-credit quality like zero-coupon bonds, debentures, and term deposits.

Being a good option for the risk-averse individual, arbitrage funds can also profit from trading stocks on different exchanges, for example, Purchase of a stock of $75 on the ABC stock exchange and selling it for $75.25 on the XYZ stock exchange. Arbitrage funds lead investors towards greater returns in all ways possible.

Taxability

Tax treatment of arbitrage funds is equal to that of equity funds, as they invest mostly inequities. This equity-based fund has more tax advantages and is a preferred option during volatile conditions in the stock market.

For investors in the tax bracket of 20 percent or 30 percent, arbitrage funds are best mutual funds as they provide a safe space for their money.

The returns earned by holding best arbitrage funds for more than a year are tax-free; these are known as long-term capital gains (LTCG). A 15% tax is levied on income from these funds in the first year, and it’s known as a short-term capital gain (STCG). There is no dividend distribution tax on these funds, but when the stock market is unstable, rich dividends can be reaped with these funds.

Although, even the best performing arbitrage mutual funds are not suitable for short-term investors and to gain the tax benefits one needs to hold it for about one year.

As arbitrage funds are equity-based, they do involve certain risk but they’re still less risky than other equity-based financial instruments.

Major Advantages

Arbitrage funds have a lot of advantages, they are:

1.Low risk – As these funds are simultaneously bought and sold, there is not much risk involved if one is in for long-term investment. Arbitrage funds also invest a bit of their capital in the highly stable debt securities. With high tolerance, they also become highly appealing by investing more heavily in debt. Therefore, if arbitrage funds are less profitable, there are other ways of finding profit.

2.Works in a volatile market – It is one of the few kinds of low-risk funds that work profitably in a highly volatile market. As individual stock prices have a lot of difference in a volatile market, arbitrage funds get to use it to its advantage by the simultaneous buying and selling in different markets. Investors who look for low-risk but greater return in a volatile market, choose to go for arbitrage funds.

3.Taxed as equity funds - If one holds their shares in an arbitrage fund, which are treated as equity funds (long equity represents portfolio’s at least 65% ), for more than a year then gains received are taxed at the capital gains rate and not income tax rate. Capital gain rates are lower than income tax rate; hence arbitrage funds have a tax advantage.

Let's have a closer look

Now let us jump and check about these top 10 mutual fund schemes.

Nippon India Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.91% annualized returns in the last three years. In the last year, its returns were 6.97%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.97% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹0
AUM9,497Cr
1Y Returns7.0%

Edelweiss Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.83% annualized returns in the last three years. In the last year, its returns were 7.04%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 7.04% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM3,854Cr
1Y Returns7.0%

Axis Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.82% annualized returns in the last three years. In the last year, its returns were 6.74%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.74% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹0
AUM2,532Cr
1Y Returns6.7%

Kotak Equity Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.65% annualized returns in the last three years. In the last year, its returns were 6.71%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.71% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM16,198Cr
1Y Returns6.7%

IDFC Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.74% annualized returns in the last three years. In the last year, its returns were 7%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 7% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹100.

Min Investment Amt₹0
AUM10,891Cr
1Y Returns7.0%

BNP Paribas Arbitrage Fund Direct Growth

Fund Performance: This fund has given NA annualized returns in the last three years. In the last year, its returns were 6.73%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.73% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM662Cr
1Y Returns6.7%

L&T Arbitrage Opportunities Fund Direct Growth

Fund Performance: This fund has given 6.63% annualized returns in the last three years. In the last year, its returns were 6.53%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.53% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM801Cr
1Y Returns6.5%

Invesco India Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.52% annualized returns in the last three years. In the last year, its returns were 6.56%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.56% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM234Cr
1Y Returns6.6%

Franklin India Equity Savings Fund Direct Growth

Fund Performance: This fund has given NA annualized returns in the last three years. In the last year, its returns were 6.43%. It has continually hit its benchmark in the Equity segment.

Why to invest: It is one of the most remarkable Equity mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.43% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM270Cr
1Y Returns6.4%

Indiabulls Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.47% annualized returns in the last three years. In the last year, its returns were 6.58%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.58% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹0
AUM38Cr
1Y Returns6.6%

UTI Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.6% annualized returns in the last three years. In the last year, its returns were 6.85%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.85% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM2,915Cr
1Y Returns6.8%

Aditya Birla Sun Life Arbitrage Fund Direct Growth

Fund Performance: This fund has given 6.66% annualized returns in the last three years. In the last year, its returns were 6.89%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.89% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹0
AUM5,150Cr
1Y Returns6.9%

UTI Equity Savings Fund Direct Growth

Fund Performance: This fund has given NA annualized returns in the last three years. In the last year, its returns were 5.36%. It has continually hit its benchmark in the Equity segment.

Why to invest: It is one of the most remarkable Equity mutual funds in India. This fund has constantly outperformed other similar funds, providing 5.36% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM267Cr
1Y Returns5.4%

ICICI Prudential Equity Arbitrage Direct Growth

Fund Performance: This fund has given 6.61% annualized returns in the last three years. In the last year, its returns were 6.67%. It has continually hit its benchmark in the Hybrid segment.

Why to invest: It is one of the most remarkable Hybrid mutual funds in India. This fund has constantly outperformed other similar funds, providing 6.67% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹1,000.

Min Investment Amt₹0
AUM13,392Cr
1Y Returns6.7%

DSP Arbitrage Fund Direct Growth

Fund Performance: This fund has given NA annualized returns in the last three years. In the last year, its returns were 7.18%. It has continually hit its benchmark in the Equity segment.

Why to invest: It is one of the most remarkable Equity mutual funds in India. This fund has constantly outperformed other similar funds, providing 7.18% returns in the last one year. Minimum lump sum investment amount required to invest in this scheme is ₹0. Minimum SIP investment amount required for this scheme is ₹500.

Min Investment Amt₹0
AUM810Cr
1Y Returns7.2%

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