Shariah compliant investments in India

TechnoparkToday.com(Aug, 2013)>> Investment schemes catering to philosophies propagated by a particular community is an interesting concept. It is slowly spreading in Indian Financial Market. I would like to explain Shariah compliant funds that have been introduced in the recent years. Let me first give you an idea of what exactly is Shariah compliance.

Shariah, is the moral code and religious law of Islam. Activities prohibited under the Shariah law include drinking alcohol, consuming tobacco, gambling, eating pork, interest lending business which includes traditional banks and hotels etc.

We have 3 Shariah compliant funds in our financial market. Out of three one is a passive fund and other two are actively managed funds. These funds don’t invest in the companies which are engaged in liquor, gambling, tobacco, entertainment, securities trading, banking and finance as earning interest is sin in Islamic law. Another criterion is these funds only invest in a company where debt should not exceed 33 percent of the average market capitalization over a 12 month periods.

The major challenge in ethical funds is product awareness and its marginal market demand. In India, the concept of has not taken off in a big way. But situation is changing now. Not only Muslims but also Hindu,Jain and other community showing interest to invest in these products after knowing the significance of these products.

The scheme return also good. One of the schemes has given an annualized return of 21.36 percent and manages Rs 104.89 crores. The benchmark of the fund is CNX 500 Shariah. Investors who want to take an exposure to a socially responsible fund can consider investing into this category.

Author Info:– Sudhakaran Namboodiri is a Financial Expert and Investment adviser based on Technopark Trivandrum. You can reach him on 934980 6684 / 0471 -2700636 for your investment/tax related queries & requirements