These Arbitrage Funds are Your Best Bets When the Market Remains Volatile!


  • Want to play safe during market fluctuations? Invest in best arbitrage funds that hedge by keeping the money in both cash and future markets
  • These funds include ICICI Prudential Equity Arbitrage Fund, IDFC Arbitrage Fund, Kotak Equity Arbitrage Fund, etc

Not often you come across a fund that invests in equities and has a low risk. But there’s one particular fund namely Arbitrage Fund that invests in equity derivatives (futures) and yet come with a low risk quotient. The reason being the hedging it does by investing in the cash market as well. In fact, this fund thrives on the pricing differential between cash and future markets. The bigger the volatility, the greater are the gains. So, if you see the market going through volatile movement, it won’t be bad if you invest in some of the best arbitrage funds and make the most.

Top-performing Arbitrage Funds in India

The table below entails returns of best arbitrage funds across different periods, take a look.

Fund Name1-year Return3-year Return5-year Return10-year Return
ICICI Prudential Equity Arbitrage Fund6.08%6.00%6.50%7.30%
IDFC Arbitrage Fund6.34%6.08%6.43%7.17%
Kotak Equity Arbitrage Fund6.23%6.16%6.58%7.36%
Nippon India Arbitrage Fund6.32%6.28%6.76%-
Aditya Birla Sun Life Arbitrage Fund6.30%6.04%6.49%6.88%

Portfolio Composition

Fund NameTop Equity HoldingsTop Debt Holdings
ICICI Prudential Equity Arbitrage FundHDFC, HDFC Bank, Reliance Industries, State Bank of India (SBI), Infosys, ITC, Axis Bank, Tata Consultancy Services, Larsen & Toubro, Bharti Airtel, etc.Certificate of Deposit, Fixed Deposit, Commercial Paper, Debentures and Non-convertible Debentures (NCDs) of IndusInd Bank, Axis Bank, Bank of Baroda, RBL Bank, etc.
IDFC Arbitrage FundReliance Industries, Infosys, HDFC, ICICI Bank, Axis Bank, SBI, Larsen & Toubro, Asian Paints, BPCL, Bajaj Finserv, GAIL, Grasim Industries, Petronet LNG, etcFixed Deposits, Debentures and NCDs of Axis Bank, ICICI Bank, HDFC Bank, LIC Housing Finance, National Housing Finance Bank, Sundaram Finance, etc
Kotak Equity Arbitrage FundReliance Industries, ITC, HDFC, Infosys, TCS, Grasim Industries, Hindustan Unilever, Larsen & Toubro, HCL Technologies, etc.Term Deposits, Commercial Paper and NCDs of HDFC Bank, Axis Bank, LIC Housing Finance, IDFC First Bank, etc.
Nippon India Arbitrage FundReliance Industries, TCS, Bajaj Finance, Bajaj Finserv, Hero Motocorp, Grasim Industries, ICICI Bank, etc.Fixed Deposits, Debenture, Commercial Paper, NCDs of Axis Bank, HDFC Bank, Federal Bank, Shriram Citi Union Finance, etc.
Aditya Birla Sun Life Arbitrage FundReliance Industries, TCS, Bajaj Finance, Insfosys, HDFC Bank, HCL Technologies, HPCL, SBI, Hindustan Unilever, Adani Enterprises, Grasim Industries, etc.Debenture, NCDs, Fixed Deposits and Commercial Paper of Tata Capital, HDFC, Federal Bank, LIC Housing Finance, IDFC First Bank, HDFC Bank, M&M Financial Services, etc.
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Note – Data Sourced from Value Research as on November 15, 2019

Which Type of Investors Will Like Investing in Arbitrage Funds?

As these funds do hedging, chances of double-digit returns are rare. Plus, the debt holdings consisting of money-market instruments will most likely have 7%-8% return. So, aggressive investors having the intention to mop up a significantly high corpus may not like investing in this fund. It’s more for the conservative investors who want to play safe.

Disclaimer – “Mutual fund investments are subject to market risks. Please read the scheme related documents carefully before investing”.

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