Parag Parikh Arbitrage Fund

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The Parag Parikh Arbitrage Fund is an open-ended arbitrage scheme of PPFAS Mutual Fund, launched on 27 October 2023 by PPFAS Asset Management Private Limited following a new fund offer that ran from 23 October 2023 to 27 October 2023. It is the fifth open-ended scheme in the PPFAS Mutual Fund product line, after the flagship Parag Parikh Flexi Cap Fund (24 May 2013), the Parag Parikh Liquid Fund (9 May 2018), the Parag Parikh ELSS Tax Saver Fund (4 July 2019), and the Parag Parikh Conservative Hybrid Fund (28 May 2021). The scheme is benchmarked to the Nifty 50 Arbitrage Total Return Index.

The scheme is constructed under the SEBI Mutual Funds Regulations 1996 and the SEBI arbitrage mutual fund India category framework set out in the SEBI scheme rationalisation circular 2017. The Arbitrage Fund category is defined as an open-ended scheme investing in arbitrage opportunities, with at least 65 per cent of net assets in equity and equity-related instruments through cash-futures arbitrage and other arbitrage strategies. The 65 per cent equity-and-equity-related threshold qualifies the scheme for equity-oriented mutual fund tax treatment under Section 112A and Section 111A of the Income-tax Act, 1961, despite the net equity market-risk exposure of the portfolio being approximately zero (cash long positions are fully hedged by index-futures short positions, leaving only the arbitrage spread as net return).

The Parag Parikh Arbitrage Fund AUM stood at approximately Rs 2,059 crore as of mid-2026, reflecting substantive scaling from the NFO seed corpus. The scheme is jointly managed by Rajeev Thakkar (Chief Investment Officer Equity), Raunak Onkar (Head of Research), Raj Mehta (Fund Manager Debt) and Rukun Tarachandani (Fund Manager Equity). The four-fund-manager structure reflects the scheme’s combined equity-arbitrage-and-debt allocation: the equity team manages the cash-futures arbitrage book, while the debt-team handles the residual cash and short-debt allocation.

Within the PPFAS Mutual Fund scheme architecture, the Arbitrage Fund occupies the equity-tax-treated cash-equivalent slot, providing investors a treasury-management vehicle that retains the favourable equity-oriented tax regime. The scheme is positioned for short- to medium-term capital parking, with the principal advantage over the Parag Parikh Liquid Fund being the equity-oriented tax treatment at slab rates above 20 per cent (where the LTCG concessional 12.5 per cent rate above the Rs 1.25 lakh annual exemption is materially more favourable than slab-rate treatment of debt-fund STCG).

This article is the principal reference on the Parag Parikh Arbitrage Fund. Related references include PPFAS Mutual Fund (the asset management company), arbitrage mutual fund India (the SEBI scheme category), arbitrage fund taxation (the tax framework), arbitrage vs liquid parking (the comparison framework with liquid funds), and the Parag Parikh Liquid Fund (the parallel cash-management scheme with debt-fund tax treatment).

History

NFO: 23 to 27 October 2023

The Parag Parikh Arbitrage Fund new fund offer ran for five days from 23 October 2023 to 27 October 2023, with allotment and continuous offer commencement immediately following the NFO close. The launch was the fourth post-rationalisation product addition for PPFAS, extending the AMC’s scheme suite from four to five open-ended schemes spanning equity (Flexi Cap and ELSS), liquid, conservative hybrid, and now arbitrage categories.

The NFO context was operationally significant in several respects:

Post-Finance Act 2023 timing: The October 2023 launch occurred after the Finance Act 2023 elimination of the debt-fund LTCG concessional regime (effective 1 April 2023), which materially affected the tax positioning of liquid funds, ultra-short funds, and other debt-oriented cash-management vehicles. The arbitrage category, retaining equity-oriented tax treatment, became structurally more tax-efficient relative to debt funds for high-slab-rate investors.
Industry-wide arbitrage AUM growth: The SEBI Arbitrage Fund category had seen substantial inflows in 2023 from debt-fund redemptions seeking tax-efficient alternatives, providing favourable category-level launch conditions for the PPFAS Arbitrage Fund.
SEBI filing: The scheme’s NFO documents were filed with SEBI in August 2023, with the SEBI filing record available at https://www.sebi.gov.in/filings/mutual-funds/aug-2023/parag-parikh-arbitrage-fund_75111.html.

27 October 2023: Allotment and launch

Following NFO close, allotment occurred on 27 October 2023, with continuous offer of units commencing immediately thereafter at the prevailing applicable NAV.

21 June 2024: PPFAS CashFlex app launch

On 21 June 2024, PPFAS Asset Management launched the PPFAS CashFlex companion app, providing dedicated mobile-app subscription and redemption flows for the Arbitrage Fund and the Parag Parikh Liquid Fund. The CashFlex app uses the existing PPFAS SelfInvest login credentials and is optimised for repeated small-ticket subscription and redemption typical of cash-management usage.

AUM growth

The Parag Parikh Arbitrage Fund AUM has grown to approximately Rs 2,059 crore by mid-2026, reflecting substantive demand for equity-tax-treated cash-management products following the post-2023 debt-fund tax-regime change. The scheme’s AUM growth is consistent with the category-wide arbitrage AUM expansion observed across major AMCs through 2023 to 2026.

Investment mandate

SEBI Arbitrage Fund category constraints

The Parag Parikh Arbitrage Fund is classified as an Arbitrage Fund under the SEBI scheme categorisation framework. The category is defined as an open-ended scheme investing in arbitrage opportunities, with category-specific allocation constraints:

Minimum 65 per cent equity and equity-related instruments: To qualify for equity-oriented mutual fund tax treatment under the Income-tax Act, 1961.
Arbitrage strategy: Investment in cash-futures arbitrage and other arbitrage opportunities; the equity allocation is structurally hedged through index-futures or stock-futures short positions, leaving the arbitrage spread as net return.
Open-ended structure: Daily subscription and redemption at applicable NAV.

Cash-futures arbitrage mechanism

The cash-futures arbitrage strategy involves simultaneous long position in a cash-market equity (or basket of equities) and short position in the corresponding equity-futures contract. Where the futures-market price trades at a premium to the cash-market price (the standard arbitrage condition during the equity-futures roll-cycle), the simultaneous long-cash-short-futures position locks in the cash-futures spread as expiry-day convergence return. The mechanism operates as follows:

At trade initiation: Buy shares in the cash market and simultaneously sell equivalent quantity in the futures market at the futures-market premium price.
Through the futures contract life: Hold both positions; the equity-market price movement is offset between the long-cash and short-futures legs, leaving the cash-futures basis as the structural P&L driver.
At contract expiry: Either roll the futures contract to the next series (capturing the new cash-futures basis) or reverse the position at expiry-day convergence (settling the original spread). The cash-leg is also rolled by selling shares and entering a new long-cash-short-futures position.

The arbitrage spread typically ranges from 5 to 8 per cent annualised in normal market conditions, with periodic widening during high-volatility episodes and narrowing during low-volatility episodes. The PPFAS Arbitrage Fund seeks to capture this spread across a diversified basket of liquid equity-futures eligible for arbitrage.

Debt and cash residual allocation

The portion of the portfolio not deployed in active arbitrage positions is allocated to short-duration debt and money-market instruments, providing residual return contribution and immediate redemption-settlement liquidity. The debt residual allocation is managed under the AMC’s broader conservative-credit discipline.

Net market-risk exposure

The structural cash-futures arbitrage hedging leaves the portfolio’s net market-risk exposure approximately zero in the equity dimension. The scheme’s NAV volatility is accordingly substantially lower than pure-equity scheme NAV volatility, with periodic volatility spikes during arbitrage-spread-disruption events (typically associated with extreme market dislocation or futures-market expiry mechanics).

Fund management

The Parag Parikh Arbitrage Fund is jointly managed by four fund managers, with bifurcated responsibility across the arbitrage book and the residual debt allocation.

Rajeev Thakkar, Chief Investment Officer (Equity)

Rajeev Thakkar is the Chief Investment Officer (Equity) and Director of PPFAS Asset Management. Thakkar leads overall equity-side strategy oversight for the Arbitrage Fund.

Raunak Onkar, Head of Research

Raunak Onkar is Head of Research at PPFAS Asset Management and co-fund manager of the Arbitrage Fund equity sleeve.

Raj Mehta, Fund Manager (Debt)

Raj Mehta is Executive Vice President and Fund Manager (Debt) at PPFAS Asset Management. Mehta leads debt-side management for the Arbitrage Fund’s residual debt allocation, applying the AMC’s conservative-credit framework.

Rukun Tarachandani, Fund Manager (Equity)

Rukun Tarachandani is Executive Vice President and Fund Manager (Equity) at PPFAS Asset Management. Tarachandani holds a B.Tech in Information Technology, a PGPM in Finance, and is a CFA Charterholder and CQF. He began his career in 2013 at Goldman Sachs Global Investment Research, subsequently moved to Kotak Mahindra AMC (small and mid-cap research), and joined PPFAS in March 2021 as Vice President, Research. He was promoted to Executive Vice President and Fund Manager (Equity). Tarachandani’s quantitative background (CQF: Certificate in Quantitative Finance) is well-suited to the systematic execution requirements of the arbitrage strategy.

Reporting and oversight

Fund-manager performance and arbitrage-execution decisions are reviewed by the AMC investment committee, the AMC Board, and the PPFAS Trustee Company Private Limited board under the SEBI MF half-yearly trustee report framework.

Performance

Benchmark: Nifty 50 Arbitrage TRI

The Parag Parikh Arbitrage Fund is benchmarked to the Nifty 50 Arbitrage Total Return Index, the NSE Indices-constructed index that tracks the return profile of a notional Nifty 50 cash-futures arbitrage strategy. The index is the standard benchmark for SEBI Arbitrage Fund category schemes and aligns with the scheme’s cash-futures-arbitrage investment approach.

Returns

Arbitrage-fund returns track the prevailing cash-futures arbitrage spread, which is loosely correlated with money-market yields plus the futures-premium component driven by funding-cost expectations and equity-derivatives market dynamics. Through 2024 to mid-2026, the Parag Parikh Arbitrage Fund delivered annualised returns broadly in line with the category average and the Nifty 50 Arbitrage TRI benchmark.

The scheme’s rolling versus trailing returns profile is structurally similar to that of well-managed arbitrage funds, with returns tracking the slow-moving arbitrage spread.

Peer comparison

Within the SEBI Arbitrage Fund category, the Parag Parikh Arbitrage Fund competes with substantially larger and longer-established arbitrage schemes from the major AMCs, including:

Kotak Equity Arbitrage Fund (a long-running category leader).
ICICI Prudential Equity Arbitrage Fund.
HDFC Arbitrage Fund.
Edelweiss Arbitrage Fund.
Tata Arbitrage Fund.
Aditya Birla Sun Life Arbitrage Fund.
SBI Arbitrage Opportunities Fund.

Tracking-difference relative to category peers and to the Nifty 50 Arbitrage TRI benchmark is the principal differentiator in the category, given the structurally narrow return distribution of arbitrage strategies.

Operational details

Total Expense Ratio (TER)

The Parag Parikh Arbitrage Fund TER is set under the SEBI Mutual Funds Regulations 1996 Regulation 52 slab structure applicable to equity-oriented open-ended schemes, with the Direct Plan TER substantially lower than the Regular Plan TER under the regular versus direct plan mutual fund framework.

Exit load

The Parag Parikh Arbitrage Fund applies a graded exit-load structure on redemptions within a defined period from subscription (typically 30 days for arbitrage schemes, although exact parameters are set by the AMC in the SID). The exit-load structure is calibrated to discourage very-short-stay capital that imposes operational cost without proportionate benefit.

Minimum investment

The minimum investment in the Parag Parikh Arbitrage Fund is Rs 1,000 for lump-sum subscriptions and Rs 1,000 for SIP subscriptions, with additional purchase in multiples of Rs 1.

Custodian and RTA

Custodian: Deutsche Bank AG, Mumbai Branch.
Registrar and Transfer Agent (RTA): Computer Age Management Services Limited (CAMS).
Statutory Auditor: M/s. M. M. Nissim and Co. LLP.

NAV computation

The Parag Parikh Arbitrage Fund NAV is computed daily under the mutual fund NAV computation framework, with arbitrage positions marked to market and derivative-position margin accounted on a daily basis. Applicable-NAV rules follow the SEBI NAV applicability rule 2021 and the NAV cut-off reform 2021.

Settlement

Redemption settlement follows the standard SEBI mutual-fund settlement framework for equity-oriented schemes (T+2 in normal course, with progressive migration toward shorter settlement cycles under SEBI directives), although operationally the Arbitrage Fund settles closer to a T+1 or T+2 timeline depending on the redemption-day-of-month and derivative-roll-cycle considerations.

Tax treatment

Equity-oriented status

The Parag Parikh Arbitrage Fund maintains a minimum 65 per cent equity-and-equity-related allocation (predominantly through cash-equity legs of cash-futures arbitrage), satisfying the equity-oriented test for tax-classification purposes. The scheme is accordingly taxed as an equity-oriented mutual fund under Sections 112A and 111A of the Income-tax Act, 1961, despite the net market-risk exposure being approximately zero through the structural cash-futures hedging.

The equity-oriented tax classification is the principal structural tax advantage of arbitrage funds over the Parag Parikh Liquid Fund and other debt-oriented cash-management vehicles.

Capital-gains tax

Long-term capital gains (LTCG): Gains on redemption of units held for more than 12 months are taxed under Section 112A at 12.5 per cent (post-Finance Act 2024 amendment effective for transfers on or after 23 July 2024) on aggregate annual LTCG above the Rs 1.25 lakh exemption threshold.
Short-term capital gains (STCG): Gains on redemption of units held for 12 months or less are taxed under Section 111A at 20 per cent (post-Finance Act 2024 amendment), regardless of the unit-holder’s slab rate.

Comparison with liquid fund tax

The Parag Parikh Arbitrage Fund tax treatment is materially more favourable than the Parag Parikh Liquid Fund tax treatment for high-slab-rate investors:

Holding period	Arbitrage Fund	Liquid Fund (post-2023)
Less than 12 months	20% STCG (Section 111A)	Slab rate (up to 30% + surcharge + cess)
More than 12 months	12.5% LTCG above Rs 1.25 lakh exemption	Slab rate (up to 30% + surcharge + cess)

For investors in the 30 per cent slab plus applicable surcharge and cess, the arbitrage-fund tax advantage is material: a 20 per cent STCG rate (Arbitrage) versus an effective 31.2 to 39 per cent slab-rate (Liquid Fund, depending on surcharge), and a 12.5 per cent LTCG rate above the exemption (Arbitrage) versus the same slab rate (Liquid Fund). See arbitrage vs liquid parking for the side-by-side comparison framework.

For low-slab-rate investors (below 20 per cent), the tax comparison is less favourable: the 20 per cent arbitrage STCG rate may exceed the unit-holder’s effective slab rate on liquid-fund STCG.

Reporting

Capital gains are reported in the AIS mutual fund India and via the CAMS-KFin capital gains statement for income-tax return preparation. See also arbitrage fund taxation for the comprehensive arbitrage-fund tax framework.

Distribution channels

Direct Plan

The Direct Plan of the Parag Parikh Arbitrage Fund is available through:

PPFAS SelfInvest portal: https://selfinvest.ppfas.com/ (web and mobile applications).
PPFAS CashFlex app: Dedicated companion app, launched 21 June 2024.
MF Utility (MFU): MF Utility consolidated industry platform.
MF Central: MF Central joint CAMS-KFin investor service portal.
CAMS Online: CAMS Online RTA-direct portal.
BSE StAR MF: BSE-platform direct-plan access.
Third-party Direct Plan platforms: Zerodha Coin, Groww, Kuvera, ET Money, Paytm Money, INDmoney, 5Paisa, Angel One, Upstox, mStock and others.

Regular Plan

The Regular Plan is available through ARN-empaneled mutual fund distributors under the AMFI ARN framework, with distributor commissions paid as trail commissions under the mutual fund trail commission framework.

Comparison with peer schemes

Arbitrage category peers

Within the SEBI Arbitrage Fund category, the Parag Parikh Arbitrage Fund competes with several substantially larger arbitrage schemes. Peer comparison considerations include:

AUM scale: Kotak Equity Arbitrage Fund and ICICI Prudential Equity Arbitrage Fund operate at multi-tens-of-thousands-of-crores AUM, providing scale-related operational advantages (lower per-trade execution cost, wider eligible-futures universe).
Tracking the Nifty 50 Arbitrage TRI: All major peer schemes target similar arbitrage strategies; tracking-difference relative to the benchmark is the principal differentiator.
Operational quality: All major peer schemes offer T+1 to T+2 settlement, Direct Plan electronic subscription, and SIP/STP/SWP support.

Comparison with the Parag Parikh Liquid Fund

The Parag Parikh Liquid Fund and the Parag Parikh Arbitrage Fund occupy the same cash-management slot within the PPFAS scheme suite, with the principal differentiator being the tax-classification treatment. For high-slab-rate investors with a 12-month-plus holding horizon, the Arbitrage Fund is structurally more tax-efficient; for short-stay capital (less than 30 days) and low-slab-rate investors, the Liquid Fund may be operationally preferable. See arbitrage vs liquid parking.

Recent developments

CashFlex app launch (June 2024)

The PPFAS CashFlex app launched 21 June 2024 provides dedicated mobile-app subscription and redemption for the Arbitrage Fund (and the Liquid Fund), streamlining repeated small-ticket capital deployment.

Industry-wide arbitrage AUM growth

The SEBI Arbitrage Fund category has experienced substantial AUM growth through 2023 to 2026, driven by debt-fund redemptions seeking tax-efficient alternatives following the April 2023 tax-regime change. The Parag Parikh Arbitrage Fund AUM growth from launch to approximately Rs 2,059 crore by mid-2026 is consistent with this category-wide trend.

Borivali ISC opening (February 2026)

The Borivali (West) Investor Service Centre opened 19 February 2026, providing additional in-person service for Arbitrage Fund investors in Mumbai.

Criticism and debates

Equity-oriented tax classification rationale

A recurring policy-level critique is that the equity-oriented tax classification of arbitrage funds, despite their approximately zero net equity market-risk exposure, represents a tax-arbitrage opportunity rather than a substantive policy outcome. Critics have periodically suggested that the tax framework should apply economic-substance tests to recharacterise arbitrage funds as debt-equivalent vehicles. PPFAS, in common with other AMCs in the category, has positioned its scheme as compliant with the existing Income-tax Act, 1961 classification framework that applies the 65 per cent equity-and-equity-related test on a portfolio-composition basis rather than on a net-market-risk basis.

Modest AUM relative to category leaders

The Parag Parikh Arbitrage Fund AUM of approximately Rs 2,059 crore is materially smaller than the category-leader arbitrage schemes from Kotak, ICICI Prudential and HDFC. The modest AUM scale provides operational flexibility but limits scale-related per-trade execution cost advantages.

Arbitrage-spread compression risk

A category-wide risk, common to all arbitrage funds, is that excess AUM inflows to the category (across all participating AMCs) may compress cash-futures arbitrage spreads through capacity exhaustion in the underlying eligible-futures universe. This is a category-level risk rather than a scheme-specific risk, but is a periodic topic in AMC factsheet commentary.

External references

PPFAS Asset Management official Arbitrage Fund page: https://amc.ppfas.com/schemes/parag-parikh-arbitrage-fund/
SEBI filing record for Parag Parikh Arbitrage Fund (August 2023): https://www.sebi.gov.in/filings/mutual-funds/aug-2023/parag-parikh-arbitrage-fund_75111.html
Cafemutual NFO coverage: https://cafemutual.com/news/nfo/30472-ppfas-mf-launches-its-arbitrage-fund
PPFAS Asset Management factsheet hub: https://amc.ppfas.com/downloads/factsheet/
PPFAS Mutual Fund AMFI member page: https://www.amfiindia.com/member/64
PPFAS CashFlex announcement: https://x.com/PPFAS/status/1804026803151135099
AngelOne Arbitrage Fund AUM and direct-plan data: https://www.angelone.in/mutual-funds/mf-schemes/parag-parikh-arbitrage-fund-direct-plan-growth
SEBI Mutual Funds Regulations 1996 (consolidated): https://www.sebi.gov.in/legal/regulations/jul-2024/securities-and-exchange-board-of-india-mutual-funds-regulations-1996-last-amended-on-july-08-2024-_85101.html
NSE Indices Nifty 50 Arbitrage Index methodology: https://www.niftyindices.com/

References

PPFAS Asset Management Private Limited, “Parag Parikh Arbitrage Fund”, AMC scheme page, https://amc.ppfas.com/schemes/parag-parikh-arbitrage-fund/, retrieved 16 May 2026.
SEBI, “Parag Parikh Arbitrage Fund Filing”, SEBI Mutual Fund Filings, https://www.sebi.gov.in/filings/mutual-funds/aug-2023/parag-parikh-arbitrage-fund_75111.html, retrieved 16 May 2026.
Cafemutual, “PPFAS MF launches its Arbitrage Fund”, https://cafemutual.com/news/nfo/30472-ppfas-mf-launches-its-arbitrage-fund, retrieved 16 May 2026.
AngelOne, “Parag Parikh Arbitrage Fund Direct Plan Growth”, https://www.angelone.in/mutual-funds/mf-schemes/parag-parikh-arbitrage-fund-direct-plan-growth, retrieved 16 May 2026.
PPFAS Mutual Fund, “Monthly Factsheet” series, https://amc.ppfas.com/downloads/factsheet/, retrieved 16 May 2026.
AMFI, “PPFAS Mutual Fund Member Page”, https://www.amfiindia.com/member/64, retrieved 16 May 2026.
SEBI, “Categorization and Rationalization of Mutual Fund Schemes”, Circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated 6 October 2017, https://www.sebi.gov.in/legal/circulars/oct-2017/categorization-and-rationalization-of-mutual-fund-schemes_36199.html, retrieved 16 May 2026.
Government of India, Income-tax Act 1961, Sections 112A and 111A (as amended by Finance Act 2024), https://www.indiacode.nic.in/, retrieved 16 May 2026.
PPFAS Asset Management Private Limited, “PPFAS CashFlex Launch”, official communication 21 June 2024, https://x.com/PPFAS/status/1804026803151135099, retrieved 16 May 2026.
AlphaStreet, “Interview with Rukun Tarachandani, Domestic Equity Fund Manager, PPFAS Mutual Fund”, https://alphastreet.com/india/interview-with-rukun-tarachandani-domestic-equity-fund-manager-ppfas-mutual-fund/, retrieved 16 May 2026.
NSE Indices Limited, “Nifty 50 Arbitrage Index Methodology”, https://www.niftyindices.com/, retrieved 16 May 2026.
SEBI, “Mutual Funds Regulations, 1996” (as amended), https://www.sebi.gov.in/legal/regulations/jul-2024/securities-and-exchange-board-of-india-mutual-funds-regulations-1996-last-amended-on-july-08-2024-_85101.html, retrieved 16 May 2026.

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Last reviewed: 16 May 2026
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