Skip to main content

Arbitrage Funds



Higher returns & change in taxation of debt funds attract investors
Arbitrage funds have attracted significant investments by large investors such as high net worth individuals (HNIs) and corporate investors in the past three months. Inflows into arbitrage funds have been primarily responsible for the surge in assets of equity funds in the last three months. From a contribution of less than 1% two years ago, arbitrage funds now contribute 7% to the total equity assets under management (AUM).

Factors such as better returns compared with the fixed-deposit returns, and change in shortterm tax treatment of debt funds have resulted in massive investments in arbitrage funds by these large investors. As a result, in the past three months, the AUM of arbitrage funds has grown by 92% to . 26,615 crore in ` June from . 13,885 crore in ` March. On the other hand, the other hand, the AUM of equity mutual funds industry grew by just 8.8% to ` . 3.32 lakh crore.

Arbitrage funds have provided returns of 8.5-9% annually .For a sustained inflow, returns should be 30-40 basis points higher than that of liquid funds

According to Value Research, Edelweiss has offered the best return of 8.7% in the arbitrage fund category . The AUM of arbitrage funds has expanded by ` . 12,729 crore in the past three months.The biggest gainer, in terms of AUM expansion, has been JM financial (inflow of ` . 2,730 crore), followed by ICICI Pru (. `2,104 crore), Kotak (.`1,783 crore), and Reliance (.`1,664 crore).

Arbitrage funds aim to generate returns by tracking the price difference of stocks which are available for trade in cash and futures markets. Suppose on July 1, a fund manager buys 1,000 shares of Reliance Industries in cash market, which are trading . 990 per share. Heshe then at ` sells an equivalent quantity in the futures market at ` . 1,000 a share. Thus, the fund manager earns a spread of `. 10 per share, or 1.1% per share. Given these facts, large investors keep a keen eye on these funds.

Another major reason for increase in investments in arbitrage funds is the change in the tax policies. During the July 2014 Union Budget, the government increased the period for which the short-term capital tax would be applicable on the returns of debt funds from one year to three years. As a result, large investors have been shifting their investments from debt funds to arbitrage funds.

Nearly half of the total inflows in June, we believe, origi nated due to tax factor. Apart from this, we are witnessing nearly ` . 5,000-6,000 crore of inflows every month into the regular equity schemes. T he AUM of the arbitrage fund of Birla fund has increased to . 699 crore in June 2015 as against ` . 143 crore three months ago.` Experts point out that the returns generated by arbitrage funds would not grow further and may come down in the coming months. The open interest of derivative stocks in the market has on an average reached . 52,000 crore. Arbitrage funds ` now account for over half of this compared with less than 5% two years ago. Given such a high concentration, incremental money that comes in the market will be chasing the same stocks. This would impact the returns of arbitrage funds as it would limit expansion in price differential between cash and futures market.

 
imggallery

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

Popular posts from this blog

Surrender ULPPs

  ICICI Pru LifeTime and ICICI Pru Lifestage are Unit Linked Pension Plans. Such insurance linked retirement plans are neither good investments nor do they offer sufficient insurance cover. As you can see, these have turned out to be bad deals. In the Lifetime plan, the fund value is not even equal to the total premiums that you have paid and in the Lifestage plan your return is just about 6% which is quite low. The mortality charges are as per your age which is why they have increased. Moreover, once these plans matures, you will have to compulsorily opt for annuity (regular income) and the annuity rates are generally modest. Assuming these plans mature in the next one year, it will be wise to surrender the plan now and curb your future commitments.   Before you choose to buy a term plan, you have to consider a few points. You need to insure yourself, only during the time you are working and your family is financially dependent on you. At the age of 59, not all insurance companies w...
Read more

NPS Investment Choice for Safe Investors

Invest NPS Online       Whether they invested through SIPs or put in a lump sum amount, risk-averse individ uals have earned the highest returns. These are investors who stayed away from stocks and divided their NPS corpus between G class gilt funds and C class corporate debt funds. On average, gilt funds have given 9.75% annualised returns while corporate debt funds have churned out more than 11% in the past five years. As a result, the average return for ultra-safe investors in the past five years is in double digits. Even in the short term, ultrasafe investors have been the biggest gainers among NPS investors. Will the good times continue? The gilt funds of NPS are holding long-term bonds with an average maturity of over 19 years and a modified duration of about 9 years.These funds have done well because interest rate cuts have pushed down bond yields. But experts say this trend will not stay forever. NPS is a long-term investment and the bonds are predominantly held to matu...
Read more

ICICI Pru Constant Maturity Gilt dividend

Invest ICICI Prudential Constant Maturity Gilt Fund Online ICICI Prudential Mutual Fund   has announced dividend under the following schemes: Scheme Dividend ( R /unit) ICICI Pru Constant Maturity Gilt-DQ 0.26543239 ICICI Pru Constant Maturity Gilt Direct-DQ 0.27171609 ICICI Pru Q Interval Plan I-D 0.10617296 ICICI Pru Q Interval Plan I Direct-D 0.10703967 ICICI Pru Q Interval Plan I Ret-D 0.10617296             The record date has been fixed as June 13, 2016.   ----------------------------------------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in india for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Franklin India TaxShield 4. ICICI Prudential Long Term Equity Fund 5. IDFC Tax Advantage (ELSS) Fund 6. Birla Sun Life Tax Relief 96 7. DSP BlackRock Tax Saver Fund 8. Reliance Tax Saver (ELSS) ...
Read more

Buy Health Insurance Plan even if you are covered with my Employer

Buy Health Insurance Plan Online Yes, getting a private insurance cover now, which extends beyond your retirement age, is recommended There are a few reasons why buying a health insurance plan may make sense even though you get medical insurance from your employer. Here are the points you need to think about. Firstly, your employer's insurance coverage will only protect you as long as you are employed with the company. The policy will terminate when you quit the job or when you retire. Post retirement is perhaps the phase when one needs it the most but you won't have it then. Moreover, buying a new insurance policy after the age of 50 means that there will be no coverage for pre-existing diseases.   Lastly, health insurance policy you get from your employer may or may not cover your dependants. ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver M...
Read more

Mutual Fund Review: Taurus Tax Shield

    Taurus Tax Shield has seen a turnaround in performance since 2007, but still remains a volatile offering… The fund has seen a turnaround in its performance since 2007 and has delivered impressively during market rallies since then. The portfolio is also more diversified. It contained its downfall to an average level in 2008 but is still one of the most volatile offerings in this category. Bold investors can look at this fund.   Strategy The fund manager invests across the market capitalisation and sectors. The selection of stocks is made on the basis of long-term business prospects and value creation. Fund Insight Launched in March 1996, the fund was a laggard with just two annual outperformances. Concentrated stock bets and high exposure to mid and small caps led to it being hit harder during market downturns. The number of stocks in the portfolio never exceeded 20 and it was not rare to see the top 5 holdings account for around 60 per cent of the portfolio. After b...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now