Compare the best arbitrage funds in India 2026 — Kotak, Invesco, ICICI Prudential, ABSL and Tata Arbitrage. Live NAV, 1Y returns, AAUM and risk metrics from RightAdvise database. Better than FD? Find out here.
Sorted by 5-year CAGR. Click any fund for full analysis — rolling returns, drawdown chart, NAV history and risk ratios.
If you had invested ₹1 lakh 5 years ago in each fund, here is how much it would be worth today. Calculated from 5 years of daily NAV in the RightAdvise database.
💡 What is AAUM? AAUM stands for Average Assets Under Management — the average value of all investor money a fund managed during a specific quarter. Reported to SEBI every quarter via AMFI. More reliable than a single-day AUM snapshot.
| Fund | NAV | AAUM | 1Y Return | 3Y CAGR | 5Y CAGR | 10Y CAGR | Max Drawdown | Sharpe (3Y) |
|---|---|---|---|---|---|---|---|---|
| Invesco India Arbitrage Fund | ₹36.56 2026-06-04 | ₹20.4K Cr Jan–Mar 2026 | +6.4% | +7.6 % p.a. | +6.8 % p.a. | +6.5 % p.a. | -0.5% | 1.39 |
| Kotak Arbitrage Fund | ₹42.37 2026-06-04 | ₹43.5K Cr Jan–Mar 2026 | +6.3% | +7.6 % p.a. | +6.7 % p.a. | +6.5 % p.a. | -0.6% | 1.39 |
| Tata Arbitrage Fund | ₹16.01 2026-06-04 | ₹15.5K Cr Jan–Mar 2026 | +6.4% | +7.6 % p.a. | +6.7 % p.a. | — | -0.6% | 1.49 |
| Aditya Birla Sun Life Arbitrage Fund | ₹30.30 2026-06-04 | ₹18.3K Cr Jan–Mar 2026 | +6.3% | +7.5 % p.a. | +6.6 % p.a. | +6.4 % p.a. | -0.5% | 1.31 |
| ICICI Prudential Equity Arbitrage Fund | ₹38.88 2026-06-04 | ₹19.2K Cr Jan–Mar 2026 | +6.2% | +7.4 % p.a. | +6.5 % p.a. | +6.4 % p.a. | -0.6% | 1.20 |
As per SEBI, Arbitrage Funds are hybrid funds that exploit price differences between the cash (spot) market and futures market of the same stock. They must invest at least 65% of their assets in equity and equity-related instruments through arbitrage positions. Because of this 65% equity exposure, they are taxed like equity funds despite having very low actual market risk.
An arbitrage fund works by simultaneously buying a stock in the cash market and selling it in the futures market at a slightly higher price — locking in a small, near-certain profit. This price gap (called the arbitrage spread) exists because futures prices are slightly higher than spot prices due to the cost of carry. The fund captures this spread repeatedly across many stocks, generating steady, low-risk returns. Because both sides of the trade are locked in simultaneously, the fund has virtually no directional market risk — it does not matter whether markets go up or down.
Arbitrage funds are popular as a short-term parking option — especially for investors in higher tax brackets. Because they maintain 65% gross equity exposure (through arbitrage positions), they qualify for equity fund taxation: gains held over 1 year are taxed at 12.5% LTCG, and gains under 1 year at 20% STCG. This makes them significantly more tax-efficient than FDs or liquid funds for investors in the 30% tax bracket. The best arbitrage funds in India 2026 have delivered 7 to 8% annualised returns over 3 years — comfortably better than savings accounts and comparable to many FDs, with better post-tax returns for high-income investors.
For a 30% tax bracket investor holding for 1+ year: Arbitrage fund returns of ~7.5% are taxed at 12.5% LTCG = effective 6.56% post-tax. A FD at 7.5% is taxed at 30% = effective 5.25% post-tax. Arbitrage wins by ~1.3% annually — which compounds significantly over time. For a 5% tax bracket investor, the difference is minimal and an FD may be simpler. Always calculate post-tax returns for your specific tax situation before choosing.
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