Hyderabad Investors Pour Rs 310 Cr into Tata Arbitrage Fund in 3 months as Market Volatility Shifts Strategy
"In the current environment, arbitrage funds are uniquely positioned to capture the potential benefits of market volatility while shielding investors from direct equity risks. Elevated roll spreads and sustained volatility have enabled arbitrage funds to deliver reasonable returns, even as traditional income avenues have become less attractive. For investors seeking equity tax returns, arbitrage funds offer a suitable proposition," said Sailesh Jain, Fund Manager, Tata Asset Management.
According to data from the Association of Mutual Funds in India (AMFI), arbitrage funds attracted Rs 43,077 crore between April and June 2025, surpassing inflows into other hybrid and equity categories. This surge underscores investor preference for instruments that can deliver relatively reasonable returns while minimising equity risk during periods of heightened uncertainty. However, profit is not guaranteed.
Reflecting the broader industry trend, the Tata Arbitrage Fund too, saw inflows of Rs 5,217 crore between April and June 2025, with Rs 310 crore coming from Hyderabad. The fund had assets under management of Rs 14,274 crore as of June 30, 2025.
The environment is especially conducive for arbitrage strategies, as elevated volatility and strong roll spreads have opened potential return opportunities. The Reserve Bank of India's recent easing measures—cutting the repo rate by 50 basis points and the Cash Reserve Ratio by 100 basis points—has further boosted the appeal of arbitrage funds over traditional fixed income avenues. The upcoming corporate earnings and a positive monsoon outlook are also expected to lift market sentiment.
As global and domestic uncertainties continue to cloud market outlook, arbitrage funds are a choice for investors to help them navigate choppy waters. With interest rates on a downward trend and savings account returns declining, traditional fixed-income options have become relatively less attractive in terms of returns. At the same time, factors such as the anticipated Indo-US trade deal, tariff negotiations, and ongoing geopolitical tensions are keeping the market volatility elevated. Although the US dollar index remains subdued for now, any spike in global risk aversion may trigger fresh market swings. In this backdrop, arbitrage funds seek to offer investors a low-risk way to capitalise on volatility without direct equity exposure.
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