Zerodha Fund House has launched its new Arbitrage Fund, with the New Fund Offer (NFO) open for subscription from August 12 to August 14, 2026. The fund requires a minimum investment of ₹5,000 and aims to provide a low-volatility, tax-efficient option for parking short-term surplus cash by exploiting price differences in the equity and derivatives markets.
Zerodha Fund House officially entered the arbitrage space today, August 12, 2026, with the launch of its new Arbitrage Fund. The open-ended equity scheme is available for subscription during its New Fund Offer (NFO) period, which closes on August 14, 2026. Investors can start their investment with a minimum amount of ₹5,000. The fund is managed by Kedarnath Mirajkar and is benchmarked against the NIFTY 50 Arbitrage TRI.
Investment Strategy and Objectives
The fund's primary goal is to generate returns by capturing temporary price differences for the same stock between the cash market and the futures market. By buying a stock in the cash market and simultaneously selling its futures contract, the fund seeks to lock in a profit regardless of whether the broader stock market goes up or down. To maintain its status as an equity-oriented fund, the scheme plans to invest at least 65% of its portfolio in equity and equity derivatives. In times when arbitrage opportunities are limited, the fund may allocate the remainder of its assets to short-term debt instruments to maintain liquidity.
Taxation and Exit Considerations
One of the main reasons investors often consider arbitrage funds is their tax treatment. Because the fund maintains a minimum 65% exposure to equity, it is taxed similarly to equity mutual funds. This can be more beneficial for investors in higher tax brackets compared to other short-term savings tools. For gains realized after holding units for more than 12 months, long-term capital gains are taxed at 12.5% on amounts exceeding ₹1.25 lakh per financial year. For holdings of less than 12 months, short-term capital gains are taxed at 20%.
Investors should note that while this fund aims for lower volatility compared to pure equity funds, it is not risk-free. Returns can fluctuate based on the effectiveness of the fund manager in identifying profitable spreads and the availability of such opportunities in the market. Furthermore, the fund has an exit load of 0.25% if investors choose to redeem or switch their units out within 30 days of the allotment date. Investors tracking this fund should monitor how the manager navigates market liquidity and whether the fund manages to consistently capture price spreads as its asset base grows.