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The BSE’s Non-Haraam Index
arindam arindam 06 Jan, 2011
The ups and downs of a bundle of Shariah-approved stocks can now be tracked by Islamic investors
In late December, the Bombay Stock Exchange launched the country’s first fully Indian Shariah-compliant stock index. While the National Stock Exchange, which trades a lot more than the BSE, has issued a list of Shariah-approved stocks, it does not host a separate index. The BSE index lists companies whose products and practices are in line with locally-set Islamic guidelines.
That means no investment in firms dealing with alcohol, firearms, pork, porn, tobacco and other products deemed sinful. The index aims to create an Islamic finance industry in India, and attract money from cash-rich investors across the Arabian Sea.
The index was formed in partnership with Taqwaa Advisory and Shariah Investment Solutions (Tasis), and will be called the BSE Tasis Shariah Index. Tasis’ Shariah board boasts of Mufti Abdul Kadir Barkatulla, a Darul Uloom Deoband graduate; Mufti Khalid Saifullah Rahmani, a founding member of the All India Muslim Personal Law Board; and Dr Hafiz Mohammed Iqbal Masood Al-Nadvi, who holds a PhD in Islamic jurisprudence.
What’s interesting is how issues of interest-bearing debt are resolved. The founders say any interest earned must have a ‘purging amount’, explained on the Tasis website thus: ‘Purging involves calculation of that pro rata share of the impure (interest) income earned by a company which is the responsibility of the investor on whose behalf the calculation is being done.’ The onus, thus, is on the investor to donate the ‘impure income’ to charity.
Airtel, Reliance Industries, Dr Reddy’s, Titan, Voltas, Hindustan Unilever, Tata Global Beverages and Godrej Consumer Products are part of the index. And since 2008, according to a BSE press release, the Shariah 50 stocks have outperformed the Sensex by nearly 25 per cent.
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