Top Arbitrage Funds to Invest in March 2025

Arbitrage Funds make profits by taking advantage of the difference in price between the cash and derivates markets. In these schemes, the fund managers buy assets at low prices from one market and sell them at higher prices in another. Also if there are no arbitrage opportunities available in the market, fund managers have the option to invest in debt or equity to generate returns.

Capital Gain Tax

Arbitrage funds are taxed similarly to equity mutual funds, meaning if an investor holds their investment for more than a year, then the investor has to pay a 12.5% tax on the profit or if the investments are for less than a year, a short-term capital gains tax of 20% will apply.

Stock market ups and downs can help arbitrage funds by generating more price gaps to profit from. As returns from arbitrage funds do not depend on interest rates that makes them a good choice for investors who don’t want to take a call regarding changing interest rates.

Arbitrage Opportunities

Sometimes, there may be times when fewer arbitrage opportunities will be available, especially when the market moves in one direction. However, an unpredictable market is better for arbitrage funds as it creates more opportunities to earn profits.

Top Arbitrage Funds to Invest in March 2025

• Kotak Equity Arbitrage Fund: It is a hybrid mutual fund from Kotak Mahindra Mutual Fund that focuses on creating income and growth of capital by mainly investing in arbitrage opportunities.
• Nippon India Arbitrage Fund: It is a type of hybrid mutual fund that aims to create income by taking advantage of differences of price between cash and derivate markets (arbitrage opportunities).

Arbitrage funds are generally low-risk, but it’s important to ensure your fund manager is making smart moves to maximise returns without unnecessary risks.