Indiabulls Mutual Fund has launched an arbitrage fund, an open-ended fund, that intends to take advantage of price differences in the cash and derivative segments of the equity markets.

A minimum of 65 per cent will be invested in arbitrage, while the remaining will be used to buy debt and money market securities.

The fund, classified as low risk, will remain open till December 15 and its performance will be benchmarked against the Crisil Liquid Fund Index.

The fund comes with the direct and regular options, and has growth, dividend and bonus options. The minimum application amount is ₹1,000 (in the case of an SIP) and ₹5,000 otherwise. There is an exit load of 0.5 per cent if the units are redeemed or switched within three months of allotment.

Speaking to BusinessLine, fund manager Sumit Bhatnagar said, “Since interest rates are expected to fall in the medium-term (the current yield on 10-year government securities is 8.05 per cent), the fund aims to provide investors with returns in eight to nine per cent range.”

The Indiabulls fund will invest in stocks that are in the FII restricted list – that have reached the limit on foreign shareholding. Bhatnagar believes arbitrage opportunities will crop up in these stocks between the cash and futures markets when FIIs are unable to further invest in the cash segment.

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