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Islamic investment or Shariah compliant investment in India


Many people do not invest in mutual funds as they feel it is forbidden under Islam (non halal) to invest in stock market related products.But there are many companies which qualify for investment under Islam and you can invest in them through Shariah compliant funds.

These funds will help you invest your money in shariah compliant companies and also purify non-Shariah compliant income (non halal income).

In long term equity investments can generate inflation beating returns.

What is Islamic investment (halal investment) or Shariah compliant investment?

Shariah compliant means investment which complies with principals of Islam. It is forbidden under Islam to invest in areas related to:

  1. Alcohol

  2. Tobacco

  3. Gambling

  4. Pornography, drugs etc

  5. armaments and destructive weapons

  6. pork and related by-products;

  7. dead animals not slaughtered according to the rules of the Sharia(non halal food products)

  8. gold and silver

  9. armaments and destructive weapons

  10. Institutions like banks which generate income from interest payment.

  11. Companies with high debt.

  12. Any other activity which as per Shariah board violates Islamic religious principals

Which are the Islamic investment (halal investment) or Shariah compliant investment options in India ?

Goldman Sachs CNX Nifty Shariah Index ETF, Tata ethical and Taurus ethical mutual funds are Shariah compliant investment options. These funds are indexed against Nifty-50 Shariah, NSE 500 Shariah and S&P BSE 500 Shariah.

Tata ethical and Taurus ethical mutual funds are actively managed funds, while Goldman Sachs CNX Nifty Shariah Index is ETF which tries to reflect composition of Nifty-50 Shariah.

Nifty-50 Shariah, NSE 500 Shariah and S&P BSE 500 Shariah are Shariah compliant stocks listed on NSE and BSE stock exchange.

How do mutual fund house and stock exchange ensure Shariah compliance ?

They employ services of premier third party Shariah advisory institutions to ensure Shariah compliance. Shariah board of this institutions screen and regularly monitors the stocks for Shariah compliance. Stocks are regularly added and deleted based on their Shariah compliance status.

Shariah board also advises on identification and purification of non Shariah compliant income generated by a Shariah compliant mutual fund. Non Shariah compliant income is donated in charity.

How is the performance of Shariah compliant fund ?

In long term (5 years or more) the Shariah compliant funds have outperformed or matched their category average.Thus you will not loose on returns by making investment in Shariah compliant fund.

Even Non-Muslims who do want to invest in ethical companies can consider these funds.

Above returns are as on 02 Sep 2016.Returns over 1 year are Annualised.

Source: www.valueresearchonline.com

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