Zerodha Asset Management Private Limited has launched the Zerodha Arbitrage Fund, an open ended scheme investing in arbitrage opportunities. The NFO opens on 12-08-2026 and closes on 14-08-2026.
The scheme sits in Zerodha Fund House’s hybrid line-up, earning income by capturing the price gap between a stock’s cash market price and its futures price, parking the rest in debt instruments.
Investors looking for short term parking, with lower volatility than a pure equity fund and equity style taxation, may find this worth a look before the window closes.
Zerodha Arbitrage Fund NFO details
Fund name | |
Fund type | Open ended scheme investing in arbitrage opportunities |
Category | Hybrid Scheme, Arbitrage Fund |
Nature of scheme | Market neutral, invests in cash-futures arbitrage plus debt and money market instruments |
Benchmark | Nifty 50 Arbitrage Index TRI |
Fund manager | |
NFO opens | 12-08-2026 |
NFO closes | 14-08-2026 |
Reopens for ongoing sale and repurchase | Within 5 business days of allotment |
Minimum investment | Rs 5,000 during NFO, and any amount thereafter |
Additional purchase | Lumpsum: Rs 5,000; SIP: Rs 1,000, both in multiples of any amount thereafter |
SIP amount | Rs 1,000 across daily, weekly, monthly and other available frequencies |
NAV during NFO | Rs 10 per unit |
Plans and options | Direct Plan only, Growth Option only |
Risk level | Low risk, per the fund’s own product labelling at NFO stage |
Stamp duty | 0.005% of the transaction value, deducted from units allotted |
Entry load | Nil |
Exit load | 0.25% if redeemed within 30 days of allotment; nil after 30 days |
AMC details
AMC name | Zerodha Asset Management Private Limited |
Sponsor | Zerodha Broking Limited |
Trustee | Zerodha Trustee Private Limited |
Assets under management | Not available (new scheme) |
Website | |
Registered office | Indiqube Penta, New No. 51 (Old No. 14), Richmond Road, Bangalore – 560025 |
Source: AMFI India, New fund offer : Zerodha Arbitrage Fund
What has the AMC launched?
An arbitrage fund does not pick stocks the way a typical equity scheme does. It looks for small, temporary price gaps between the same stock trading in two places: the cash, or spot, market and the futures market.
A stock’s futures price and its cash price usually move in step. When they briefly drift apart, the fund buys the stock in the cash market and simultaneously sells an equal quantity in the futures market.
Because one leg is bought and the other sold, the position does not depend on the stock’s price direction afterwards, which is why arbitrage funds are called market neutral.
This launch differs from Zerodha Fund House’s usual passive, index tracking range. It is not passive, since there is no index to replicate, and not a traditional active fund either, since the manager is not forming a view on companies. The objective is to earn the spread between the two markets, with debt and money market instruments cushioning periods when spreads are thin.
Normally the scheme keeps 65% to 100% in equity and related instruments, including derivatives, and up to 35% in debt; defensively, this can flip to 0% equity and 100% debt.
How does the strategy work?
Step | What happens? |
1 | The fund manager scans stocks for a gap between the cash market price and the futures price of the same stock. |
2 | Where a workable spread exists, the fund buys the stock in the cash market and sells an equal futures quantity at once. |
3 | The position is held while cash and futures prices converge toward the contract’s expiry date. |
4 | Near expiry, the manager rolls the position into the next month’s contract, or closes it out. |
5 | Money not deployed in arbitrage sits in debt and money market instruments like treasury bills. |
6 | If spreads shrink market-wide, the fund can shift more defensively into debt instruments. |
Let’s understand through an example
Say a company’s shares trade at Rs 500 in the cash market, while its one month futures contract trades at Rs 502. The fund buys the shares at Rs 500 and simultaneously sells an equal number of futures contracts at Rs 502.
As expiry nears, the two prices converge, since cash and futures prices must meet on the expiry date. The fund closes both legs around that point, capturing the Rs 2 difference regardless of the stock’s direction. This is a simplified illustration of the mechanism only, not a return projection.
Portfolio allocation
Instruments | Normal circumstances | Defensive circumstances |
Equity and equity related instruments, including derivatives | 65% to 100% | 0% to 65% |
Debt and money market instruments, cash and cash equivalents | 0% to 35% | 35% to 100% |
Investment strategy
The approach rests on identifying and rolling arbitrage positions rather than security selection. As a contract nears expiry, the fund manager typically rolls it into the next month to keep the arbitrage running, tracking spread movements and open interest along the way.
Because cash and derivative positions are matched, the fund is not taking a leveraged directional bet; derivatives here construct the arbitrage rather than amplify exposure. Liquidity needs are met through the debt sleeve, and the scheme may also lend securities within SEBI’s limits for incremental income.
Potential benefits
Potential benefit | Why does it matter? |
Market neutral positioning | Returns do not depend on market direction, since each position is matched. |
Equity style taxation | Long term gains beyond Rs 1.25 lakh are taxed at 12.5%, often lower than debt fund rates. |
Low exit load | Just 0.25%, and only within 30 days of allotment. |
Key risks
Risk | What does it mean? |
Spread risk | Thin market-wide spreads can leave the fund leaning more on debt returns. |
Derivative risk | A mistimed roll into the next contract can erode the captured spread. |
Credit and liquidity risk | The debt sleeve carries the usual risk of an issuer default or thin trading, though maturities stay short. |
Concentration risk | Arbitrage opportunities cluster in certain stocks, not spread evenly across the market. |
Who may consider this fund?
Investor type | Why it may fit |
Someone parking money for 6 months to 2 years | The strategy targets low volatility over shorter horizons than a typical equity fund. |
Investors in a higher tax bracket | Equity style taxation on gains can work out more favourably than the tax treatment on comparable debt instruments. |
Someone wanting an alternative to a short term fixed deposit | Offers daily liquidity (after the reopening date) and a low, time-based exit load instead of a lock-in. |
Who may not find it suitable?
Investor type | Why it may not fit |
Investors seeking equity-like growth | The market neutral design means the fund is not built to capture broader market rallies. |
Very short term parking, under 30 days | The exit load within the first 30 days works against very short holding periods. |
Investors wanting a track record | As a new scheme, it has no performance history to evaluate before investing. |
Comparison with traditional investment options
Fixed Deposit | Debt Mutual Fund | Hybrid Fund | Equity Mutual Fund | Zerodha Arbitrage Fund | |
Risk | Low | Low-moderate | Moderate | High | Low |
Return potential | Fixed | Moderate | Moderate | High | Modest |
Volatility | None | Low-moderate | Moderate | High | Low |
Liquidity | Locked in | High | High | High | High |
Taxation | As per slab | Varies | Varies | Equity oriented | Equity oriented |
Zerodha Arbitrage Fund Review by Zenith Finserve
The Zerodha Arbitrage Fund fits a narrow role: parking money you expect to need within six months to two years, where you might otherwise default to a savings account or short term deposit, but want equity style tax treatment. For a fuller picture of how mutual funds fit into a plan, see Zenith’s guide to mutual funds in India.
Because the strategy is market neutral, returns are not meant to track the broader stock market; the profile sits closer to a low duration debt fund than an equity scheme, despite the equity tax treatment.
That combination is really the entire investment case here, not equity-like growth.
The 0.25% exit load within 30 days signals this is not built for intraday or overnight parking. Suitability depends on your existing portfolio and goals, so speak with Zenith’s mutual fund advisors or explore Zenith’s investment planning services before investing.
How Zenith Financial Management can help
At Zenith Financial Management, we follow a process driven investment framework. We assess your goals, cash flows, risk profile, time horizon, existing investments, loans and tax situation before suggesting investments. We align our investment suggestions with your financial objectives and review them periodically to keep them suitable as your circumstances change.
Similar NFOs on Zenith
Prism Hybrid Long Short Fund NFO: uses cash-futures and merger arbitrage within a broader hybrid strategy, but for accredited investors with a Rs 10 lakh minimum, unlike this retail-accessible fund.
DynaSIF Equity Long-Short Fund NFO: a derivative-hedged strategy using short-selling on mid and small cap stocks, also restricted to accredited investors. No pure arbitrage fund article exists on Zenith yet; flagged as a gap to revisit.
Frequently asked questions
What is the Zerodha Arbitrage Fund?
A hybrid, open ended scheme that earns from price gaps between a stock’s cash and futures price, plus debt instruments.
When does the Zerodha Arbitrage Fund NFO open and close?
It opens 12-08-2026 and closes 14-08-2026.
What is the minimum investment in the Zerodha Arbitrage Fund NFO?
Rs 5,000, and any amount thereafter. SIPs start at Rs 1,000.
Is the Zerodha Arbitrage Fund NFO good to invest in?
It suits money parked for six months to two years with equity taxation, not a search for growth.
Who is the fund manager for the Zerodha Arbitrage Fund?
Kedarnath Mirajkar.
What is the exit load on the Zerodha Arbitrage Fund?
0.25% within 30 days of allotment; nil after that.
How is the Zerodha Arbitrage Fund taxed?
As an equity fund: 12.5% long term gains above Rs 1.25 lakh, 20% short term, plus surcharge and cess.
Does the Zerodha Arbitrage Fund use leverage?
No. Each cash market purchase is matched by an equal futures sale.
What is the benchmark for the Zerodha Arbitrage Fund?
The Nifty 50 Arbitrage Index TRI.
Zerodha Arbitrage Fund review: what is Zenith’s take?
A low risk, market neutral option for short to medium term parking with equity taxation, not a growth vehicle.
