An arbitrage mutual fund
is an open - ended equity scheme that aims to generate capital appreciation &
income by predominantly investing in arbitrage opportunities in the cash &
derivatives segment (Future and options – F & O) of the equity market &
investing the balance, if any, in debt & money market instruments.
The mutual fund exploits
arbitrage opportunities by buying stocks in the spot market & selling
corresponding futures in matching positions, thereby capturing the positive
spread between the prices. Also selling stocks in the spot market & buying
corresponding futures
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