Arbitrage Funds Lead Hybrid Mutual Fund Returns in 2026

Arbitrage funds are a type of mutual fund that try to make money by buying stocks in the regular market and selling the same stocks in the futures market at the same time.

This way they can earn a small profit from the price difference.

In 2026, these funds did better than any other hybrid funds, earning 3.35% so far.

The best one‑year performers were Quant, WhiteOak Capital, and Motilal Oswal, each earning more than 7% in a year.

Over three years, Tata, Kotak, and Invesco India did the best, earning about 7.6% each year on average.

These funds must invest at least 65% of their money in stocks, but they are still less affected by stock market swings because most of the stock part is protected.

They are considered equity‑oriented for tax purposes in India.