Arbitrage funds in India

40 live funds in the Arbitrage category, ordered by 5-year return, highest first; Invesco India Arbitrage Fund leads. Funds younger than five years follow by name. Returns are for the plan each fund's page leads with, Direct where the fund has one, to each fund's latest NAV, the newest of them on 27 Oct 2026; 3 and 5 year returns are a year, compounded.

Category median, 1 year
+6.60%Middle of 34 funds
Category median, 3 years
+7.24%Middle of 26 funds
Category median, 5 years
+6.73%Middle of 24 funds

Arbitrage funds

Size is the average money the fund managed over its latest quarter. Cost is its yearly expense ratio.Filter them in the screener

NAV of 27 Oct 2026

Tax on arbitrage funds

Gains on units held over 12 months are taxed at 12.5% above ₹1.25 lakh a year; gains on units held 12 months or less at 20%.

Rules in force from 23 Jul 2024, checked 27 Oct 2026. Surcharge and cess are not included.

About arbitrage funds in India

Arbitrage funds in India are open-ended hybrid mutual funds that earn from the price gap between the cash market and the futures market for the same share. SEBI requires at least 65% of assets in equity and equity related instruments, and the equity is hedged with offsetting futures.

How the strategy works

A fund buys a share in the cash market and sells its futures contract (an agreement to trade the share at a fixed price on a set date) at a higher price. The two prices meet on the contract's expiry day, so the gap is earned whichever way the share moves. Most positions are rolled into the next month's contract at expiry.

Returns follow the size of that gap, which tends to widen when many traders buy shares on borrowed money and narrow when few do.

SEBI rules for the category

SEBI's categorisation circular of 26 Feb 2026 describes an arbitrage fund as an open-ended scheme investing in arbitrage opportunities, with a minimum of 65% of total assets in equity and equity related instruments. The Master Circular of 20 Mar 2026 limits debt to certificates of deposit, government securities maturing within a year and units of funds with a Macaulay duration under one year.

InvITs (infrastructure investment trusts) are not permitted. A fund may hold more debt under defensive considerations, which its scheme document must state.

Tax treatment

Because the equity share is at least 65%, arbitrage funds are taxed as equity-oriented funds. Gains on units sold within 12 months are taxed at 20%, and gains on units held longer at 12.5% above ₹1.25 lakh of long-term gains in a financial year, for transfers on or after 23 Jul 2024.

The futures leg carries securities transaction tax (STT). The tax is paid out of the fund, so it comes off the return.

Arbitrage and equity savings funds

An equity savings fund also holds at least 65% in equity and arbitrage combined, but it adds a minimum of 10% in debt and a net equity exposure of 15% to 40% of assets, so part of its equity is left unhedged. An arbitrage fund hedges nearly all of it. The page links to the other hybrid categories.

How this page lists them

The page ranks the live funds in the category by 5-year return, highest first. Funds younger than five years have no such return and follow, sorted by name. Size is the average money managed over the fund's latest quarter, and cost is the yearly expense ratio, the share of assets charged each year. Many funds also charge an exit load, a fee on units redeemed soon after purchase, often 0.25% within 15 to 30 days; each fund sets its own.