If you are looking for an investment option that is low risk, tax saving and gives better returns than a savings account or FD, then Best Arbitrage Funds 2025 can prove to be a great option for you. These funds make profits from different prices of the same stock in the stock market, which keeps the risk very low. At present, when volatility is increasing in the market, Best Arbitrage Funds 2025 have become a safe and smart choice for investors. In this blog, we will know which are the top performing arbitrage funds of this year and whether they fit into your investment plan.
What Are Arbitrage Funds?
Arbitrage Funds are mutual funds that make profits by buying and selling the same stock at different prices in different markets. For example, if the price of a stock is ₹ 100 in the cash market and ₹ 102 in the futures market, the fund manager buys it from the cash market and sells it in the futures – thus making a low-risk profit of ₹ 2.
These funds invest primarily in equities, but their risk is very low as they are not dependent on market fluctuations. In terms of tax, they are treated like equity funds – that is, if you invest for more than 1 year, then only 10% tax is levied on Long-Term Capital Gains (LTCG) (on profits above ₹ 1 lakh).
Who should invest? These funds are a good option for investors who want better returns than FDs at low risk, especially those who fall in the high tax slab or have short-term goals.
Difference from Liquid Funds: While Liquid Funds are based on the debt market, Arbitrage Funds earn profits from the difference in prices in the stock market. These can also be more beneficial in terms of tax and returns.
Best Arbitrage Funds in 2025
| Fund Name | AUM (₹ Cr) | 3Y Return | 5Y Return | Min SIP | Rating |
| Invesco India Arbitrage Fund | ₹19,341 | 7.11% | 5.73% | ₹500 | 5 Star |
| Nippon India Arbitrage Fund | ₹14,436 | 6.77% | 5.50% | ₹100 | 5 Star |
| Tata Arbitrage Fund | ₹12,682 | 6.84% | 5.54% | ₹150 | 5 Star |
| Edelweiss Arbitrage Fund | ₹13,644 | 6.95% | 5.63% | ₹100 | 4 Star |
| Aditya Birla Sun Life Arbitrage Fund | ₹19,341 | 7.11% | 5.73% | ₹500 | 4 Star |
1. Invesco India Arbitrage Fund : Invesco India Arbitrage Fund is a popular choice for investors looking for low risk and stable returns. The fund keeps a large portion of its holdings in cash and liquid instruments, which keeps its liquidity strong. It reflects a balance of shares and derivatives of triple A rated companies and banks. Its strategy is to earn from price differences in the market, which is working well in the current volatile environment. Its track record shows that it performs well despite the stability of the market.
2. Nippon India Arbitrage Fund : Nippon India Arbitrage Fund is known for its strong risk management and good execution. The fund manager consistently selects stocks that have a good difference between the futures and cash markets. The fund is quite popular among both retail and HNI investors, especially because its SIP amount is quite low. Its portfolio has a good mix of top grade corporates and banking stocks. Low risk and tax-efficiency make it a reliable option in 2025.
3. Tata Arbitrage Fund : The trust and transparency of Tata Group make this fund a strong option. Its portfolio shows that it adopts a balanced approach — where there is a good combination of liquid instruments and high-quality equities. The inclusion of securities of government entities like NABARD reflects its low-risk strategy. Its minimum SIP is also attractive for small investors, making it very popular in the mid segment.
4. Edelweiss Arbitrage Fund : Edelweiss Arbitrage Fund is known for its diversified holding pattern and strategic exposure. The fund invests in the internal liquid instruments of Clearing Corporation and Edelweiss, which enables it to deliver stable returns in the short term. It also has holdings in companies like Vedanta, JSW Steel, which offer good arbitrage opportunities in the future market. This fund is a bit dynamic and may be better for investors looking for short-term parking.
5. Aditya Birla Sun Life Arbitrage Fund : Aditya Birla Sun Life Arbitrage Fund is known for its investments in high-quality liquid funds and corporate papers. Its strategy revolves around stable returns and tax saving. The fund has strong holdings in companies like Vedanta and ICICI Bank which make it a defensive and structured arbitrage play. The stability and brand value of this fund makes it reliable for new investors as well.
Why Arbitrage Funds Make Sense in 2025
Market volatility increased the attraction : The Indian stock market has been quite volatile in 2025. In such an environment, the price difference between the futures and cash markets has increased, giving arbitrage funds more opportunities to earn profits. These funds are capable of delivering stable and relatively safe returns with low risk.
RBI rate cut makes it even more beneficial : In June 2025, RBI reduced the repo rate to 5.50%, which also reduced the savings and FD rates of banks. In such a situation, arbitrage funds have emerged as a better option, especially for those investors who are looking for better returns than FD at low risk.
Additional benefit of tax savings : Long term capital gain tax is levied on arbitrage funds after holding for more than a year at only 10%, while the interest received from FD gets added to your entire income and becomes taxable. It proves to be a tax-efficient investment option for investors falling in the high tax bracket.
Investor trust and growth : The arbitrage fund category saw investments of over ₹15,700 crore in May 2025. This shows that investors are very positive about this segment. Especially for investors who want to park money in the short term, it has become a practical and safe solution.
Suitable for short-term goals : If you want to invest money somewhere for the next 6 to 12 months like an emergency fund, wedding, house down payment or education funding then arbitrage funds are a good option. They have good liquidity and can also give better returns than a savings account.
Arbitrage Funds vs. Other Low-Risk Alternatives
| Investment Option | Estimated Return (1 Year) | Taxation Type | Liquidity | Risk Level |
| Arbitrage Fund | 5% – 7% | Equity Tax (STCG/LTCG) | T+1 day | Low |
| Liquid Fund | 5.5% – 6.5% | Debt Tax (STCG/LTCG) | T+1 day | Very Low |
| Fixed Deposit (FD) | 6% – 7% | Slab-Based Tax | Fixed Tenure | Very Low |
| Savings Account | 2.5% – 4% | Slab-Based Tax | Instant | Negligible |
Risks and Limitations of Arbitrage Funds
Not completely risk-free : Although arbitrage funds are considered a low-risk option, they are not completely risk-free. If the price difference (spread) between the cash and futures market decreases, the returns may also be affected.
Low spread in sluggish or falling markets : When the market is flat or bearish, the difference between futures and cash becomes very low. In such a situation, the fund’s earnings are limited and the expected returns are not achieved.
Exit load may be levied on short-term withdrawal : If you withdraw money within 30 to 60 days (depending on the rules of the fund), you may have to pay an exit load. This can become an additional cost for investors who make early withdrawals.
Returns are not fixed : Arbitrage funds may be considered stable, but their returns are not fixed. These are completely dependent on market conditions and spreads, so performance may be lower than expected at some times.
Liquidity may be affected in high volatility : Although these funds generally have good liquidity, when there is sudden high volatility in the market, there may be some delay or inconvenience in redemption.
Also Read : Top Women Investors in India 2025
How to invest in Arbitrage Funds from Rupeezy?
If you want to invest in Arbitrage Funds, Rupeezy is an easy and reliable platform for you. First, visit their website or app and complete your KYC process. Then search for “Arbitrage Funds” you will find many good options
Conclusion
Amidst rising market volatility and falling interest rates in 2025, Arbitrage Funds have emerged as a balanced and tax-efficient investment option. These funds have the potential to deliver better returns than savings accounts and FDs at lower risk. If your goal is to park short-term money and you also want to be connected to the market, then adding Arbitrage Funds to your portfolio can be a wise move.
Q1. What is an Arbitrage fund?
An Arbitrage fund is a mutual fund that earns from the price difference between the cash and futures market.
Q2. Is an arbitrage fund completely safe?
These funds are low-risk but not completely risk-free. Returns may be affected when the spread in the market decreases.
Q3. How much time should one invest in an Arbitrage fund?
Investing for at least 3 to 6 months gives better stability and tax benefits.
Q4. Do arbitrage funds give better returns than FDs?
Yes, keeping tax and liquidity in mind, arbitrage funds can give better returns than FDs.
Q5. Is it right to do SIP in an arbitrage fund?
If you want to invest money regularly at low risk then doing SIP is a good option.
Q6. How much tax is levied on an arbitrage fund?
15% (STCG) tax is levied on withdrawal before one year and 10% (LTCG) tax after one year.
Q7. Are arbitrage funds right for retirement?
These are suitable for short-term and low-risk investments. Long-term funds would be better for retirement planning.
