BSE Launches Sharia-Compliant Index

BSE along with Taqwaa Advisory and Shariah Investment Solutions (TASIS) has launched a Shariah compliant equity index - BSE TASIS Shariah 50 index, using the strict guidelines and local expertise of a domestic, India-based Shariah advisory board.

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

This index will help promote financial inclusion of the Muslim population in India and attract investment flows from international funds that adhere to Shariah norms.

Islamic law does not permit investors to invest in companies that derive significant benefit from interest or the sale of other goods/services deemed sinful within the Islamic faith (e.g. alcohol, tobacco, firearms, etc.). Shariah compliant indices are used to attract investors who do not wish to invest in stocks of companies that engage in activities that they deem to be against their beliefs.

TASIS employs a strict, proprietary screening process utilizing their knowledge of and local access to listed Indian companies to ensure that all stocks included within the BSE TASIS Shariah 50 are strictly compliant with Islamic Shariah law.

TASIS has adopted financial screening norms that are more conservative than its peers, making the product ideal for Islamic investors seeking investments that adhere to the strict, conservative Shariah compliance norms.

Additionally, the index is the first Shariah compliant equity index in India to be publically disseminated on a real-time basis, providing a new tool for use by Islamic and other socially responsible investors to track the performance of India’s largest and most liquid Shariah compliant stocks.

The index can be licensed for the construction of Shariah compliant financial products including mutual funds, ETFs, and structured products.

The BSE TASIS Shariah 50 employs index constituent weight capping. Index constituent weights are capped at 8% at rebalancing, in an effort to increase the diversification within the index and ensure greater compliance with international regulatory and statutory investment guidelines.

BSE's rival NSE has a Shariah index, linked to the Standard and Poor's Shariah-compliant index.

Shariah Screening Process includes:
1. Business screening: Ensures that companies selected are in businesses that do not harm society per Shariah law.

2. , Interest activity screening: Ensures that companies involved in interest-bearing activities are within Shariah tolerance levels.

Several studies in recent years have found out that Muslim participation in India's financial system is very low. The Sachar Committee Report (2006) found that nearly 50% of India's Muslim population was excluded from the formal financial sector.

Reference: BSE

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