GreenFunds
Money word, in simple language

Arbitrage fund

A hybrid fund that buys shares and sells them at the same time in futures, earning the small price gap.

Fund types Figures verified 2026-11-03

Example. If a share costs 1,000 rupees today and its one-month future 1,006, the fund locks in the 6-rupee gap (illustration).

An arbitrage fund earns the small gap between a share’s price today and its price in the futures market. Because it buys and sells at once, it carries little stock market risk. It keeps at least 65% in shares, so it usually meets the tax law’s equity-oriented test. See hybrid funds explained and derivatives.

Questions people ask

What is an arbitrage fund?

It's a SEBI hybrid fund category that follows an arbitrage strategy: buying a share in the cash market and selling it in the futures market at the same time, earning the difference. SEBI requires at least 65% in equity and equity related instruments.

Is an arbitrage fund safe?

It's low risk compared with share funds, because each position is hedged, so market falls largely cancel out. Returns depend on how wide the price gaps are, which changes over time, so returns aren't fixed.

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