Arbitrage mutual funds swing back to inflows in October 2026 with ₹3929 crore: Top 5 schemes by 1, 3, 5-year returns

Arbitrage funds witnessed a sharp turnaround in investor flows in October 2026, attracting net inflows of around ₹3,929 crore compared with net outflows of ₹3,956 crore in September 2026. The category had also recorded inflows of around ₹3,789 crore in August 2026, according to the Association of Mutual Funds in India (AMFI) data.

Arbitrage funds are a type of hybrid mutual funds that seek to generate returns by exploiting price differences between the cash and futures markets. These funds typically buy a stock in the cash market and simultaneously sell its futures contract, aiming to capture the price difference as the two prices converge.

They have to maintain at least 65% exposure to equity and equity-related instruments, with the remaining allocation generally going towards debt and money market instruments. According to AMFI data, there are 40 arbitrage funds in the market. Here is a look at the top five funds based on their 1-year, 3-year, and 5-year returns.

Quant Arbitrage Fund leads the category with a 1-year return of 7.85%, followed by WhiteOak Capital Arbitrage Fund at 7.35%.

Franklin India Arbitrage Fund ranks third with a return of 7.29%, while Motilal Oswal Arbitrage Fund and Invesco India Arbitrage Fund follow with 7.24% and 7.07%, respectively.

Invesco India Arbitrage Direct leads the 3-year performance list with a return of 7.48%, narrowly ahead of Kotak Arbitrage Direct at 7.46%.

Tata Arbitrage Direct follows in third place with 7.45%, while ABSL Arbitrage Direct and Edelweiss Arbitrage Direct complete the top five with returns of 7.42% and 7.39%, respectively.

Invesco India Arbitrage also tops the 5-year performance list, delivering a return of 7.19%.

Kotak Arbitrage follows with 7.02%, while Edelweiss Arbitrage ranks third at 6.96%. Tata Arbitrage and Axis Arbitrage follow with returns of 6.94% and 6.90%, respectively.

Which fund is present across all three periods?

Invesco India Arbitrage is the only fund to feature among the top five across all three time periods. It ranks fifth in the 1-year list, first in the 3-year list and first in the 5-year list.

Its presence across all three periods indicates consistent relative performance among the funds considered, although past returns do not guarantee future performance.

Aditya Agarwal, Co-founder, Wealthy.in, said Arbitrage funds moved from ₹3,956 crore of net outflows in September to ₹3,929 crore of inflows in October. Their October inflows also exceeded the ₹3,514 crore received by the entire hybrid fund category.

Arbitrage funds are often used to manage short-term cash requirements, so these flows should not necessarily be seen as a change in investors’ appetite for equity risk. Unlike multi-asset or balanced advantage funds, arbitrage funds serve a different purpose in a portfolio. Investors should be clear about that distinction before choosing between them, he added.

Disclaimer: This is purely for educational/informational purposes and should not be taken as any sort of investment advice. Always consult a SEBI-registered advisor before making any investment decisions.