New Delhi, July 17 -- So far in 2025, the Nifty 50 has stayed largely in cruise control- moving within a band of 23,644 to 25,185 levels. With market volatility cooling in recent weeks, an important question arises: Could arbitrage funds-which thrive on price fluctuations-start losing their edge in this calmer environment?

Recent data suggests a strong link between volatility and fund flows. For instance, in May 2025, India's fear gauge-the India VIX-averaged a one year-high of 18.02, and arbitrage funds logged their highest monthly inflows in a year at Rs.15,702 crore, according to Bloomberg and AMFI data.







In contrast, during September 2024, when volatility cooled to a 12-month low of 13.29 and the Nifty touched lifetime highs, a...