Invesco India Arbitrage Fund Direct-Growth: Key Insights, Returns, Risks, and More

Arbitrage funds are gaining momentum in India as people are becoming inclined to investments, and market dynamics. The pricing mismatch in the market has been an age-old phenomenon and investors and traders cashing these opportunities have been also popular but mostly amongst pro traders. With the Invesco India Arbitrage Fund Direct-Growth, retail investors can also enjoy returns generated by arbitrage investments/trading. 

This article will help you navigate through the details of the Invesco India Arbitrage Fund. You will be reading all the insights about this fund, starting from its returns, to the risk involved, different financial metrics you can evaluate from here, and more. 

Fund Management and Objectives

Invesco India Arbitrage Fund Direct-Growth is a hybrid fund which cash the price difference between the derivative market and the cash market. It means that the price difference between a stock, and its derivatives whether its futures or options is cashed by the fund to generate returns. 

The fund is managed by Deepak Gupta and Kuber Mannadi – 

• Deepak Gupta: He is a CA, CWA, and also cleared CFA Level III. He has prolonged experience in the fund management field and before working in Invesco India, he used to work at Emkay Global Financial Securities Ltd. And also worked at Kotak AMC Ltd. The funds he manages apart from this arbitrage fund include Invesco India Equity Savings Fund. 
• Kuber Mannadi: He holds a PGD in the securities market and worked with multiple fund management companies which include Sahara AMC, Wipro Business Process Outsource, Capital IQ Pvt. It manages Invesco India Nifty 50 ETF apart from this arbitrage fund. 

Want to Invest in the Invesco India Arbitrage Fund? Open a free Demat account Today!

How does the Invesco India Arbitrage Fund Work?

The fund managers of this Invesco India Arbitrage Fund Direct-Growth use the price differences between cash and cash equivalents, and derivatives of equity. So, for instance, if Stock A is trading at ₹100 and its derivative strike price is ₹95 then the ₹ 5 is the difference between the two and can be cashed to generate returns. 

The fund managers need to be on their toes to find out such market discrepancies and cash them as soon as they become available. 

Performance and Returns (As of 20 Jan 2025)

Invesco India Arbitrage Fund Direct-Growth has generated an annual return of around 6.94% since inception. The fund has been consistent over the years and here is a detailed analysis of its performance and returns. 

Return Tenure	Return (%)
10 Year Return	6.57
7 Year Return	6.35
5 Year Return	6.28
3 Year Return	7.47
1 Year Return:	8.12
YTD Return	0.44
6 Month Return	3.69
3 Month Return	2

The Invesco India Arbitrage Fund consistently delivered almost double return when compared to the CCIL T Bill Liquidity Weight. The performance of the fund has remained consistent over the year and helps investors generate regular income. 

The fund has not only generated higher returns than CCIL T Bill has but also it is one of the top-performing funds in the hybrid arbitrage fund category. For all the periods stated above, the fund has performed better than the category averages. 

Investment Allocation (As of 31 Dec 2024)

The Invesco India Arbitrage Fund portfolio holds 76.13% cash and cash equivalents with 24.31% share debt instruments, and equity is negative which is -0.53%. 

Here is the investment allocation according to market capitalization – 

• Giant Cap: 50.21%
• Large Cap: 28.88%
• Mid Cap: 20.13%
• Small Cap: 0.48%

Investment allocation as per Ratings – 

• Cash Equivalents – 76.13%
• AAA – 19.82%
• AA – 0.43%
• SOV – 4.02%
• Unrated/ others – 0.04%

The top holdings of the Invesco India Arbitrage Fund include – 

Equity Segment 

• Reliance Industries – 7.69%
• Tata Motors –3.91%
• IndusInd Bank – 2.62%
• Power Fin –1.93%
• Bank Of Baroda – 1.75%

Debt Segment 

• Invesco India Liquid Direct-Growth – 11.64%
• Invesco India Money Market Direct-Growth – 5.93%
• Invesco India Corporate Bond Direct-Growth – 1.23%
• Bank of Baroda CD 24/03/2025 – 1.04%
• Invesco India Low Duration Direct-Growth – 0.58%

Key Metrics 

As of 31 December 2024, the fund has an expense ratio of 0.39%, which is a bit higher than the category average of 0.34%.

Fund Details	Information
AUM (Assets Under Management)	₹18910 Crore as of 31 December 2024
Category	Hybrid Fund
Fund Managers	Deepak GuptaKuber Mannadi
Exit Load	0.5% for redemption within 15 days
Entry Load	Nil
Minimum Investment	₹1000(Lump sum)₹ 500(SIP)
Benchmark	NIFTY 50 Arbitrage TRI

The Invesco India arbitrage fund direct plan growth NAV as of 20 January 2025 stood at ₹33.3977. 

Risk and Performance of the Invesco India Arbitrage Fund (As of 31 Dec 2024)

This fund is classified as a ‘Low Risk’ fund, which indicates that the fund offers a stable return usually without much volatility. 

1. Standard Deviation (Std Dev %): It shows how much the returns vary from the average returns generated by the funds themselves. The higher this number, the more it fluctuates.

This fund has a standard deviation of 0.54% while the average standard deviation of the hybrid arbitrage funds is around 0.61%. This indicates that the Invesco India Arbitrage Fund is less volatile than its peers. However, the difference with the CCIL T Bill Liquidity Weight is wide, which has a standard deviation of around 0.40%. This indicates that the fund is more volatile than the CCIl T-Bills. 

2. Sharpe Ratio: This ratio indicates the return you get for the risk you’re taking. A higher number means better risk-adjusted returns.

Currently, this fund has a Sharpe ratio of 2.25%, while that of the category is 1.04%, which indicates that the fund has been offering a higher risk-adjusted return. 

3. Sortino Ratio: It is similar to Sharpe but only looks at downside risk (the risk of losing money).

Similar to the Sharpe ratio, this fund has lower downside risk compared to its peers. While the average for the category stands at 1.21%, this Invesco India Arbitrage Fund Direct-Growth has a negative 2.49% ratio which is almost double the average for the category. 

4. Beta: This ratio indicates the volatility of the fund’s performance, compared to similar funds in the market. The lower the Beta, the more predictable the returns are, and vice versa. It helps in comparing funds. 

Invesco India Arbitrage Fund is even less volatile than its peers as it has a Beta of 0.51% while the average for the hybrid arbitrage fund category is 0.75%. 

5. Alpha: It measures the extra return the fund gives above the market’s average return.

The fund again has a higher alpha than its peers do, which means the extra returns offered by the fund are a bit higher. The average for the category is around 2.22% while that of the fund is only 2.30%.  

Taxation for Invesco India Arbitrage Fund 

If you’re investing in the Invesco India Arbitrage Fund, here’s how your returns will be taxed:

1. Short-Term Gains – If you redeem the fund units within 1 year of investment or 365 days, a 20% tax will be levied on the entire return generated during the period. 
2. Long-Term Gains – If you redeem the units after one year, any profit generated over and above ₹ 1.25 lakh will be taxable at a 12.5% rate. The same rate will be applicable for any investment tenure above 1 year. 

The longer you hold on to your investments, the better returns you can expect!

3. Taxes on Dividends – Dividends earned if any will be taxable at the hands of investors as per their tax slabs. If the dividend income surpasses Rs. 5000 in a financial year, then the fund house will deduct 10% TDS before disbursing the dividend into the account of the investor. 

Minimum Investment and Lock-in Period

The minimum investment amount in the Invesco India Arbitrage Fund is ₹1000 for lump sum and for SIP, it is ₹500. There is no lock-in period for the Invesco India Arbitrage Fund Direct – Growth.

Invest in the Invesco India Arbitrage Fund — SIP or lump sum at zero brokerage!

How to Invest in Invesco India Arbitrage Fund Direct?

You can invest in the Invesco India Arbitrage Fund Direct-Growth plan with Shoonya. 

Shoonya offers a free Demat account, zero brokerage trading, advanced trading tools, 100+ technical indicators, and much more!

Investing in Lump Sum Mutual Funds through the Shoonya Web Platform

Here’s a quick guide on how to invest in lump sum mutual funds through the Shoonya web platform:

1. First, you must log in to your Shoonya account at trade.shoonya.com. From the “Orders” section, click on “MF order.”
2. Search for the fund you wish to invest in; in this case, the Invesco India Arbitrage Fund Direct-Growth plan.
3. Choose “Fresh” for a new investment and enter the amount you want to invest.
4. You can complete your purchase by clicking the “Purchase” button.
5. You will receive a payment link on your registered email. Use the link to make the payment.

After payment, your mutual fund units will be allotted to your Demat account within T+2 days.

Note: You can only make the payment using the bank account registered with your Demat account.

Setting Up an SIP for Mutual Funds

If you prefer a Systematic Investment Plan (SIP) for Invesco India Arbitrage Fund Direct Plan-Growth plan, you must follow these steps:

1. First, you need to log in to your Shoonya account at trade.shoonya.com. Go to “Orders” and click on “XSIP.”
2. Find the mutual fund for which you want to set up an SIP. In this case, the Invesco India Arbitrage Fund Direct-Growth plan.
3. If this is your first SIP with Shoonya, you need to create a Mandate ID. 

For that, you must enter the mandate amount and the validity date (until you want to keep your SIP active).

4. You must submit the details, and you’ll receive a Mandate authentication link via email. Approval generally takes 24 hours.

Once your Mandate is approved, you can follow these steps to set up your SIP:

1. Go to “XSIP,” enter the SIP amount, and select “Fresh” as the transaction type.
2. Choose the date when the SIP will be debited directly from your registered bank.
3. The approved Mandate ID will auto-reflect.
4. Choose “Monthly” for monthly debits and specify the number of instalments (e.g., 24 instalments for a 2-year SIP).

If you do not want to forget your SIPs and invest systematically, the SIP method can be most suitable for you. 

Why Invest in the Invesco India Arbitrage Fund?

Invesco India arbitrage fund Direct has been performing consistently for years and has a long history of offering market-beating returns. It is not only offering higher returns compared to the category average, or the CCIL T-Bill, but it is doing that while keeping the risk factor lower than its competitors as well. This combination makes this fund a unique one and reliable for investment.  

Suitability of this Fund| Who Should Invest?

The Invesco India Arbitrage Fund Direct is suitable for investors who:

• Are risk-averse and want to take minimal risk 
• Want to make a profit out of market differences
• People looking for investment options that offer higher than the Bank’s interest rate on savings accounts or FDs
• Seeking taxation like an equity fund with a higher post-tax return
• People who fall into higher tax bracket
• Who are looking to park their funds for three months to max one-year

Conclusion

Thus, if you are looking for a low-risk hybrid fund that can diversify your portfolio, and earn you a decent return, without putting much pressure or taking higher risk, then this Invesco India Arbitrage Fund Direct-Growth can be considered. However, make sure you check your investment goals and align the investment. 

Invesco India Arbitrage Fund Direct-Growth Plan| FAQs

Source: ValueResearch

______________________________________________________________________________________

Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.