Invesco India Arbitrage Fund outperformed its category with a 1.6% return over the last three months, matching peers like HDFC and ICICI Pru Arbitrage Funds. Investors often use these schemes for low-risk parking of funds, but performance can vary significantly depending on market volatility and the time period measured.
The Invesco India Arbitrage Fund has recorded the highest returns among major schemes in its category, delivering 1.6% over the three months ending July 6, 2026. This performance was mirrored by HDFC Arbitrage Fund and ICICI Prudential Arbitrage Fund, which also generated returns of 1.6% during the same timeframe. These rankings reflect data covering funds with assets under management (AUM) of at least ₹1,500 crore.
While short-term performance highlights recent gains, different funds often lead over longer time horizons. For instance, Kotak Arbitrage Fund currently manages the largest corpus in the category at over ₹72,000 crore. Data also indicates that when looking at a six-month window, Kotak Arbitrage Fund emerges as the top performer with a gain of 3.1%. Over a three-year period, the same fund has delivered an annualized return of 7.0%, outperforming other major schemes in the top five.
Arbitrage funds operate by exploiting price differences between the cash and derivatives segments of the stock market. Because they aim to be market-neutral, their primary goal is to provide stable returns rather than high capital appreciation. Consequently, these funds are often viewed as a low-risk alternative to liquid mutual funds or savings accounts, especially for investors looking to park capital for short durations.
Investors evaluating these funds should note that returns are heavily influenced by market liquidity and the spreads available between cash and futures prices. When market volatility is high, arbitrage opportunities often increase, potentially benefiting fund returns. Conversely, in quieter markets, spreads may narrow, impacting the fund's ability to generate excess returns over its benchmark.
It is important for investors to look beyond three-month snapshots. A fund that performs well in a short-term window may not necessarily sustain that lead over one, three, or five years. Comparing performance across different timelines and checking the fund's consistency against its own benchmark—as well as the expense ratio which directly impacts net returns—remains essential. Future performance for these funds will continue to depend on market activity levels and the ability of fund managers to efficiently capture price gaps in the derivatives market.