In the context of a turbulent stock market, arbitrage funds have emerged as a lucrative investment option, yielding returns that outperform traditional bank fixed deposits (FD) over the past year. According to data from Arthlabh, these funds have delivered returns exceeding 7%, while most large banks have offered less than 7% interest on FDs during the same period. This article aims to delve into how arbitrage funds have managed to provide substantial returns, surpassing safe investment avenues like bank FDs, amidst stock market volatility.
Annual Returns of Arbitrage Funds
Recent statistics reveal that the Axis Arbitrage Fund has achieved the highest return of 7.32% over the last year. Not to be outdone, Tata and Aditya Birla’s arbitrage schemes have also performed well, each providing returns of 7.28%. When examining the Invesco Arbitrage Scheme, it has yielded a commendable 7.31%, making it a significant contender in this category.
Return Comparison Table for Arbitrage Funds
| Fund Name | Annual Return (%) |
|---|---|
| Axis | 7.32 |
| Tata | 7.28 |
| Aditya Birla | 7.28 |
| Invesco | 7.31 |
Three-Year Returns: Stability Amidst Uncertainty
Looking at a slightly longer timeframe, arbitrage funds have also shown commendable stability. Over three years, the Axis Arbitrage Fund generated a return of 6.25%. Tata’s fund reported a slightly higher rate at 6.29%, while the Aditya Birla scheme achieved 6.31%. Other notable mentions include Union Mutual Fund and HSBC, both recording returns of 6.19%. This consistency is especially important considering the fluctuations in the Indian equity market observed at the beginning of 2025, where heavy sell-offs and cautious investor sentiment created a challenging environment.
Market Trends and Investment Insights
The early months of 2025 have highlighted significant selling pressures in the mid and small-cap segments, which had previously shown promise in 2024. The underlying causes include valuation concerns and underperformance of companies, leading to investor caution. Consequently, arbitrage funds have become a safe harbor, leveraging domestic institutional investments even as foreign institutional investors pulled back.
Benefits to Investors
Despite the prevailing market weaknesses and heavy withdrawals by foreign institutional investors, domestic investment in selective sectors has proven advantageous. The Axis Arbitrage Fund predominantly invests in high-rated money market instruments, focusing on those with maturity profiles ranging from one to nine months. To maximize returns, the fund management closely monitors its investments throughout the month. Timing of entry and exit into arbitrage funds is critical, so investors must remain vigilant while navigating this investment landscape.
Conclusion
In summary, as the stock market continues to face significant volatility, arbitrage funds present a compelling alternative for investors seeking stable and attractive returns. With performance metrics consistently surpassing traditional fixed deposits, these funds represent a blend of security and growth potential, making them an essential consideration for any diversified investment portfolio.