Why arbitrage funds score over debt schemes in the medium term

In a low-interest-rate scene, they are better than bank FDs, especially if you're paying 30% tax; they also get preferential tax treatment compared to debt funds

With debt funds remaining volatile for the past eight months now, arbitrage funds stand out. While medium- to long-term debt funds have seen periods of negative returns, arbitrage funds have been stable with consistent returns.

Sample this: In the past one year, the average returns from arbitrage funds have been 6.24 per cent. One year returns for the short-term debt funds category are at 4.83 per cent, credit opportunities funds are at 5.43 per cent, income funds are at 2.33 per cent, and dynamic bond funds category returns stand at 0.86 per cent.

Arbitrage funds are equity-oriented funds that take