World

India launches sharia stock index for Muslims

Bombay Stock Exchange attempts to open stock-trading to more Muslims.

Afp December 27, 2010

MUMBAI: India's Bombay Stock Exchange launched a share index of sharia-compliant companies on Monday in an attempt to open stock-trading to more Muslims.

The BSE TASIS Sharia 50 consists of the largest and most liquid sharia-compliant stocks within the BSE 500 index.

All the companies have been vetted to ensure they comply with Islamic law, which does not allow investors to put money into firms that benefit from interest or the sale of sinful goods such as alcohol, tobacco or firearms.

The managing director and chief executive of the Bombay Stock Exchange, Madhu Kannan, said the index would attract Islamic and other "socially responsible" investors both in India and overseas.

"This index will create increased awareness of financial investments among the masses and help enhance financial inclusion," he said in a statement.

"The index will also build a base for licensing for the construction of sharia-compliant financial products, including mutual funds, ETFs (exchange traded funds) and structured products."

Several studies have found that the majority of India's 160 million Muslims have been excluded from the country's formal financial sector due to the restrictions imposed by Islamic law.

Companies included in the index have been screened by Taqwaa Advisory and Shariah Investment Solutions (TASIS), an Indian Islamic finance company based in Mumbai, whose board members include Islamic scholars and legal experts.

TASIS said the index would "unlock the potential for sharia investments in India".

"Bombay Stock Exchange has the largest number of listed sharia-compliant stocks in the world," said Shariq Nisar, director of research and operations at TASIS.

"All Muslim countries of the Middle East and Pakistan put together do not have as many listed sharia-compliant stocks as are available on the BSE."

Stocks will be reviewed every month to ensure continued compliance. Any stocks that do not meet the criteria will be removed.

COMMENTS (23)

Akhtar | 13 years ago | Reply @ac sir muslims are happy to remain backwords and poor this is the teaching they gett from mullas i appreciate govt of india for trying to include muslims in nations prosperity may be muslims like to go and work as slaves in arab countries

Aninda Chowdhury | 13 years ago | Reply As a Indian Hindu, I dont think it goes against our secular feature of the constitution. Since BSE is just a private company which looks for maximising profits like any other business house, it has all the right to attract investors by marketing its products in various ways. Tomorrow they may even open index for Jews of America or Israel citing Judaism features in their financial products. And we all know the Jews have more money than all the muslims combined in UAE and India. So, thats BSEs discretion. Yes it could have gone against Secular aspect if the Govt. of India had made it mandatory to open Sharia index for all the stock exchanges, which it didnt.

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Ravindra Mishra | 13 years ago | Reply @Rajat: My initial reaction to this index was that it is not secular. That it creates another cordon and coddle for Indian Muslims. Yet, when I thought it over, it really is another index for halal, shuddh / sattvic, pure, businesses. So, just as the funds for investments are welcome from all over, it should also be that the participation in the stocks listed on the index be open to all Indians, regardless of their religion or caste affiliations. So if a Muslim or a Hindu investor, who have real qualms about not investing in what they perceive as 'unethical' industry, this index is an ideal bet. But if that is the case, why call it an Islamic index? Why not just call it the 'Ethical' index? My thinking is, that BSE realises that India's Muslim population is a critical production and consumer base, not just for Indian industries but also in the mid future, for the investors from the Middle East. Note, investment in Mumbai, is urgently required to make it a financial hub, and extend the political and cultural bridges with the Middle East. Therefore, it is astute to highlight the Islamic aspect of this index. It is reassuring to a religious Muslim investor. Rest assured, this is going to receive a great deal of attention from Morocco to Indonesia. Thus far, India has been given the short shrift and a raw deal by the OIC countries, despite the fact that India has always maintained a friendly stance towards them. A lot of this is because of the second tier treatment that the Muslims from South Asia are meted out in the Middle East because of their financially poor health. This too is set to change. As the Middle East / Arab investors interact more with the Indian businesses, they will realise that India is a mature secular democracy and does more to protect and promote its largest minority. This will start as a business interaction, but will become a cultural exchange, softening the 'hard' edges across many, many countries. And this is a very good thing. This is the real strength of this index. What it does is, it gives the Indian Muslims a real incentive to participate in an area of India's progress that is bound to grow in the future. It shall encourage modern entrepreneurship amongst them and in all of India. More jobs for Indians of all backgrounds. And a sense of national participation all around. Call me naive, but I can half imagine Maulana Azad smiling, as he does in one of his iconic photographs.

Rajat | 13 years ago | Reply @Sanjay There is no "Hindu compliant" stock index, even in hindu majority nations like India or Nepal. We don't want a separate one too. All the concept of having a separate index though laudable goes against secularism. @Vishu Extremists like Dawood Ibrahim don't care about petty matters like religion. If he really cared about Islam he would'nt have started smuggling of drugs, or alcohol, or as a matter of fact attacked bombay.

vishu | 13 years ago | Reply Next time Daood Ibrahim / terrorists think twice before bombing Bombay Stock Exchanging. from this act BSE is excluded in bombing list ha ha

Sanjay | 13 years ago | Reply It shows how flexible and secular are Indian financial markets. Muslims who observe strictly islamic trditions within India or abroad can invest in such stocks at Bombay Stock Exchange (BSE). India can become financial hub for rich Muslim investors from middle east to indonesia, malaysia etc. Diversified portfolio and innovative products from BSE has kept this oldest bourse buzzing all the time. Great job done by exchange..!! However RBI and other finnacial regulators and govt agencies should keep close eye on the money pouring in ..check their sources and stop anti-islamic terror petro dollars from coming to such sharia compliant stocks. Let USA, Europe and other countries learn from India..How about Pakistans, Saudis, Malaysias, Indonesias having Hindu compliant stock index? just a food for thought :-)

A thinker | 13 years ago | Reply @G Din These area my opinions and i can be wrong :) Regarding to the first consideration,i think if you simply put money in stock market without studing the companies in which you are investing,in my opinion you are not so different from a gambler. In the second case if you study the companies,the market,well certainly you reduce enourmosly the risks of losing money,on the other side you also increse sharpely your potential for gains.Yes you can still lose money,in that case it simply means that education,strategy has not been proved right,but i still dont consider it gambiling as you "have thought before acting" "Then again, every serious stock market player employs education, strategy, yet we find very few winners. Why, do you think, it is so?" Actually this is a really broader,vague,not so specific question,ill try to answer. In short the reason for which i think people dont earn that much. They think short term not long term gains,which means after a stock have earned 10% they simply sell,because they are soddisfied from what they have earned,they dont think if the stock will grow more or not in that moment. They follow the flow,the flow comes always late,if the stock is growing too much well isnt time to buy the stock but to sell as the best return are already behing and probably the stock is going to experience a sluggish growth or even a downturn. People sell whenever a stock is experiencing a major downturn without understanding that this can be only momentary effect,tha can happen with a lot of companies These way of thinking atleast for me worked, I started to invest in the stock market last(june 2009) year,for now my returns have been about 89%,ive NOT gave the money to a financial expert and let him invest my money,i prefer to invest with my own mind If interested, just a quck advice Invest in Gold and Silver both in stock and in real coins,bullions. Gold had a return of almost 30% this year,Silver of 72% in 2010 Gold and silver producing companies have done even better,some examples Silver Wheaton Corp (NYSE:SLW) +150.13% Endeavour Silver Corp. (AMEX:EXK)+92.86% Mag Silver Corp (AMEX:MVG)+90.98% Silvercorp Metals Inc. (NYSE:SVM)+86.36% Some quick examples,but really my advice is to think long term and study how to invest,the companies and always dont invest too much in the stock market.diversify your portafolio,and really dont invest toomuch money in the stock,study the larger trends,the future is about Commodites,Bio Technology,Renewable Energies,investing in comapnies of this sectors wont be a bad idea. Educate yourself and then invest :)

G.Din | 13 years ago | Reply @A thinker "Investing in stock market without any education,strategy and just hoping the stock will go up,is almost gambling and thats prohibited otherwise no if you have a strategy and education about why the stock will move higher." So, is "just hoping" gambling? But, after applying your education, strategy, if you lose, isn't that betting that your education, strategy would be successful when it was not? What else is betting if not gambling. Then again, every serious stock market player employs education, strategy, yet we find very few winners. Why, do you think, it is so?

Sankalp | 13 years ago | Reply @Rajat Yes. Any company that has businesses related to the so called 'haram' items, won't be listed on the Sharia Stock Index. They are however free to trade on other stock indices as they already do.

Aninda Chowdhury | 13 years ago | Reply Please change the headline. It should be Indian pvt company (i.e., BSE) have launched sharia compliant stocks. India has a lot of stock exchanges and these are companies incorporated under Indian Companies Act, 1956. So, if you say India launches Sharia stock it means the Indian Parliament have decided to launch it. However, I welcome this move as it ensures many muslims to perform business in tune with the Sharia law. Govt. of India is also studying the Malaysian Islamic Finance model to launch Islamic Banking system in India. But, it will still take some time to be implemented.

satyram | 13 years ago | Reply @Sankalp and @ A thinker; Thankyou very much for allowing me to enhance my knowledge.

Rajat | 13 years ago | Reply Neat... an idea that requires minimal implementation costs, although I am not a stock banker, i guess that the sharia stocks would be a subset of the companies thart are not related to "haraam" items, but one question, what would happen to stocks of Kingfisher Airlines, Force India Racing Team, Sunfeast biscuits (if they are separate). As they belong to a liquor baron and a tobacco company. Does this sharia stocks exclude them.

Akhtar | 13 years ago | Reply please send me a link i want to invest

Sara | 13 years ago | Reply We should also adopt it.

A thinker | 13 years ago | Reply @satyram Investing in stock market without any education,strategy and just hoping the stock will go up,is almost gambling and thats prohibited otherwise no if you have a strategy and education about why the stock will move higher.

Sankalp | 13 years ago | Reply @satyram Going by your comment, I can see you've a very limited idea about stocks.

Jameel ur Rasheed | 13 years ago | Reply Awesome!

amoghavarsha.ii | 13 years ago | Reply Islamic banking is very far in india, as all banks have to adhere to guidelines of RBI. RBI is strict on NPA. RBI wants its customers(we indians) to be save always.

satyram | 13 years ago | Reply Fantastic, but curious to know ; I heard that all type of gambling in Islam is prohibited. Is this not a gambling, I mean to invest money in stock market ?

NaK | 13 years ago | Reply Okay, but you know more than 300 ammendments had been already made in indian consititution, so the day is not so far for this.

Ronit | 13 years ago | Reply @NAK India doesn't allow Islamic banking coz as per Indian constitution, it is illegal and unsecular, it has just allowed Shari stocks.

NaK | 13 years ago | Reply Good work,,,,,,,,,,Islamic Banking is also famousing world wide,

Sankalp + Mumbai | 13 years ago | Reply Bravo!

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