BSE Launches Shariah Index
Friday, January 07, 2011

The Bombay Stock Exchange Ltd. (BSE) and Taqwaa Advisory and Shariah Investment Solutions (TASIS) have launched the BSE TASIS Shariah 50 Index - the first Shariah Index created in India - which is expected to attract pools of capital to India from the Gulf, Europe, and Southeast Asia.

The BSE TASIS Shariah 50 index consists of the 50 largest and most liquid Shariah-compliant stocks within the BSE 500. Stocks featured in the index are screened by TASIS using strict guidelines and the local expertise of an India-based Shariah advisory board, to ensure their suitability for Islamic investors.

Islamic investors must abide by Shariah laws, under which investments in companies involved in the alcohol, tobacco, gambling or weapons trades, among others, are banned. Interest is also forbidden under Islamic strictures, meaning that many common conventional finance products such as mortgages are off limits to Islamic investors, although the industry has devised some innovative schemes to get around this problem.

Madhu Kannan, the BSE's Managing Director and Chief Executive said: ”The introduction of the BSE TASIS Shariah 50 Index will give Islamic and other socially responsible investors another means to access the Indian market and will help attract pools of capital to India from the Gulf, Europe, and Southeast Asia. This index will create increased awareness on financial investments amongst the masses and help enhance financial inclusion. The index will also build a base for licensing for the construction of Shariah compliant financial products including mutual funds, ETFs, and structured products.”

M.H. Khatkhatay a senior member of TASIS team added: “Shariah Index will unlock the potential for Shariah investments in India. This is the first time a serious and concerted effort has been made to track Shariah compliant stocks in India objectively.”

According to Dr. Shariq Nisar Director, Research and Operations, TASIS, the Bombay Stock Exchange has the largest number of listed shariah compliant stocks in the world. "All Muslim countries of the Middle East and Pakistan put together do not have as many listed Shariah compliant stocks as are available on BSE," he observed.

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.