Shariah Compliant Stocks in India
Here are few facts about Islamic Investment Opportunities in India.
There are two ways of getting profit in Islam
(1) which Islam permits (2) which Islam prohibits.
Islam has forbidden earning from interests. And has counted as big sin and among the big sins there is no which forbidden in this manner; that notice a war from Allah and his messenger. Can human being defeat Allah and his messenger?
In India Muslims are second largest population after Indonesia, Indian Muslims population estimated to be around 150, millions. Inspite of this India is routinely ignored in the vast majority of the books articles on the subject of Islamic banking and or investments.
Dow Jones has Islamic index, FTSE of Britain has not only Islamic Index but also a full fledge Islamic bank, but unfortunately there is not a single Islamic Product or an Islamic benchmark in Indian investment environment.
Even more bizarre India is not covered and not included for any of their research work by any Islamic institution or bank .although India is the big market for Islamic investments,and according to me no research work of any research institution could be complete without including India.
Although India has a good Islamic structure which provides opportunity of riba free investment and finance which gives us lots of benefit.
Yes, India is the second largest population of Muslims in the world after Indonesia. It is 150 Million and still we don’t have any Islamic Index. Dow Jones has Islamic Index.
Shariah Compliant Investments.
Here are the Shariah Compliant Investment Criterias.
Common people in our community believe that investment in stocks is prohibited. No it is not true. Indeed there are some kind of stocks, which might be prohibited but not all. So prominent Islamic scholars, and ulemas have defined all market instruments and after that they have permitted with some conditions to have investments in stock market and invest in it.
(a)The company’s activities should not include liquor, pork, hotel, casino, gambling, cinema, music, interest bearing financial institutions, conventional insurance companies, etc.
(b) The total interest bearing debt of the company at any point in time should remain below one third of its average market capitalization during the last twelve months.
(c) Its aggregate of account receivables should remain below 45% of total assets.
(d) If company has any interest bearing income it should not be more than 10% in any condition.
While Shariah compliant investment avenues are now becoming available in most countries, India has not seen large-scale development.To gauge the scope of Islamic investment opportunities in the Indian stock market, it is imperative to examine stocks that conform to Islamic Shariah principles "Out of 6,000 BSE listed companies, approximately4,200 are Shariah compliant.
The market capitalization of these stocks accounts for approximately 61% of the total market capitalization of companies listed on BSE.This figure is higher even when compared with a number of
predominantly Islamic countries such as Malaysia, Pakistan and Bahrain. In fact, the growth in the market capitalization of these stocks was more impressive than that of the non-Shariah compliant stocks.
The software, drugs and pharmaceuticals and automobile ancillaries sector were the largest sectors among the Shariah compliant stocks. They constitute about 36% of the total Shariah compliant stocks on NSE. Further on examining the BSE 500 the market capitalization of the 321 Shariah compliant companies hovered between 48% and 50% of the total BSE 500 market capitalization.