Paisa Vaisa with Anupam Gupta Nifty Outlook 2026: Why Arbitrageurs are Betting on High Volatility This Year
Jan 26, 2026
Sailesh Jain, fund manager at Tata Asset Management who runs arbitrage strategies, breaks down how arbitrage works using a simple mango-market analogy. He explains why higher volatility creates profit opportunities, how dividend and special-situation trades boost returns, and who benefits from arbitrage funds versus traditional savings. He also outlines risk controls, portfolio construction and the 2026 market outlook.
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How Arbitrage Locks Riskless Profit
- Arbitrage funds lock a riskless spread by buying cash and shorting equivalent futures, removing price risk.
- Convergence at expiry makes the initial spread the realized profit for arbitrage strategies.
Use Arbitrage For Spare Cash Management
- Move spare cash from savings or short-term FDs into arbitrage funds to gain higher post-tax returns and liquidity.
- Hold for more than two months and over one year to capture equity tax benefits and better post-tax yields.
Volatility Is An Ally For ARB Funds
- Volatility widens cash–futures spreads due to demand–supply mismatches across instruments and sectors.
- Higher volatility gives arbitrage managers more opportunities to enter, exit, and harvest additional spread gains.
