Shariah-compliant mutual funds growing in India

Shariah-compliant mutual funds growing in India

In a move that would enable Muslims in India to participate in the stock market, four asset management companies — Reliance Mutual Fund, UTI Asset Management, Way2Wealth and the newly-approved Edelweiss Mutual Fund — are planning to launch Shariah-compliant mutual funds in the coming months.

The move comes at a time when there is talk of Taurus Asset Management, which was tipped to come out with a Shariah fund earlier, is withdrawing its application from SEBI.

More than enabling Muslims to participate in the stock market, the reason for these asset management companies (AMCs) to launch a fund in the Shariah space is purely commercial. The funds are eyeing scores of rich and religious Muslims who do not invest in interest-yielding instruments or non-Shariah compliant stocks.

Shariah, the religious law of the followers of Islam, has strictures regarding finance and commercial activities permitted for believers. Arab investors only invest in a portfolio of ‘clean’ stocks. They do not invest in stocks of companies dealing in alcohol, conventional financial services (banking and insurance), entertainment (cinemas and hotels), tobacco, pork meat, defence and weapons. According to experts in Islamic investments, Muslims are only allowed to invest in companies where interest bearing income is less than 10% in any condition.

With regards to compliance, the current share of Indian Shariah-compliant market capitalisation (at 61%) is highest even when compared with the number of Islamic countries such as Malaysia (at 57%), Pakistan (51%) and Bahrain (6%). “We have been looking at the options in the Shariah space for some time now. The process to launch a Shariah fund is on. We are discussing about it with our partners,” said UTI Asset Management chief marketing officer Joydeep Bhattacharya.

The move will augur well for UTI, because it is already managing an offshore Shariah fund, including West Asian investors, partnering Al Madina Asset Management.

According to UTI sources, the fund house is likely to tie up with Mumbai-based Parsoli Corporation for launching the fund. The Shariah board in Parsoli Corporation will certify the scheme and the Parsoli Islamic Equity index would be the benchmark for the fund.

After Reliance Money launching its Shariah-compliant portfolio management service for Muslim HNIs, group firm Reliance Mutual Fund is close to filing its prospectus with the regulator to launch an Islamic fund. “The group is in advanced stage of talks with an Islamic institution to launch the fund. As a next step, Reliance is also planning to launch its entire spectrum of financial services the Shariah way,” said a company insider.

However, it will take some efforts of the part of these funds to get necessary approvals from the market regulator. According to sources in the fund industry, the regulator is not very happy to approve these funds as it feels, these schemes — intentionally or unintentionally — solicit only a class of investors to invest in them. Moreover, SEBI is still uneasy about the conduct of such funds, the screening process (of investible stocks) and the method to weed out ‘impurities’ as charity, sources said.

Devout Muslim investors weed out a portion of their gains in anticipation that these are due from investments in non-Shariah assets.

7 responses to “Shariah-compliant mutual funds growing in India

  1. tousif hameed

    its really good to know that so many companies are planning to start shariah compliant funds in india

  2. syed ilyas basha

    Islam stands for equal opportunity. The present growing trend in Islamic banking is deviating from this principle and with their resources helping them increase their riches. What about those souls who lack resources? The true concept of “grow to gether” should be adopted. The right features like MUDHARABA, MUSHARAKA, should be be developed keeping in view the social scenario. The funds of the rich should be pooled to be extended capital to the poor enterpreneurs. Proper, necessary training should be arranged as the governmental agencies do in India to help the unemployed. This can be done of course under an organizational set up under proper legal parameters. Let us understand the concept in full. simply replicating the western pattern in the name of ISLAMIC INVESTMENT can neither change the society nor offer a proper alternative to the present decaying capitalist system. The present trend should change.

    • All changes begin small. It takes time to mature and become mainstream system. Criticising right at the beginning without own contribution is uncalled for.

  3. Being a Indian muslim I am so much confused where I can invest money?
    Please let me know shariah Complianed Mutual funds as well as ELSS MFs so that I can save tax too.

  4. Syed Ilyas Basha

    Dear Anis! Assalamo alaikum.
    Thank you for your comment. I feel grateful for those who point out mine mistakes, errrs. I didn’t mean to criticize. It is already 25 + years since this concept came into practice in the form of modern banking. It is only a request, an urge to all like minded brothers, to honourable scholars to do research, explore possibilites for starting more Islamic principles-friendly financing plans like Mudharabah, Musharakah etc. I would like to share my own experience in this regard. While making efforts for one such Islamic Banking institution in our country, we have started one such unit with little fund participation from our near and dear ones. It is on a small scale and under Mudharabah, Musharakah, Qard Hasan principles. By Allah’s grace we could pay 10 per cent profit on annual basis at monthly intervals. The lack of confidence and trust makes these efforts difficult at this stage. With no legal backing we can not do it on large scale. Let us pray to Allah for legislative support from our government. With more than 80 countries already allowing it in different forms, India can not do without Islamic finance for long.

  5. Please give me the name and past performance of sariah Mutual funds available in INDIA.


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