The Bombay Stock Exchange (BSE) in the Indian city of Mumbai has launched a new index which consists of companies that meet the Islamic legal code.
The Tasis Shariah 50 was formed using guidelines from an Indian Shariah advisory board.
Studies have found that most Muslims in India are excluded from the country’s formal financial sector.
That is because Islamic law does not allow investment in companies that sell goods like alcohol, tobacco or weapons.
Neither does it allow investment in companies that derive significant profit from interest.
The index is intended to be the basis for other Shariah-compliant financial products.
‘Come and invest’
BSE Managing Director and Chief Executive Madhu Kannan said that the new index would attract Islamic and other "socially responsible" investors both in India and overseas.
"This index will create increased awareness of financial investments among the masses and help enhance financial inclusion," he said in a statement.
Companies included in the index have been screened by Tasis, which is based in Mumbai and whose board members include Islamic scholars and legal experts.
"Before anyone can attract investors, we need to put in place institutional infrastructure, and having an index to track Shariah-compliant stock is important," MH Khatkhatay, senior adviser to Tasis, told the Reuters news agency.
"If you have an ETF (exchange traded fund), for example, you need an index, or if overseas investors want to invest in Shariah index in India, this is an invitation for people to come and invest."
Tasis said the index would "unlock the potential for Sharia investments in India".
"The BSE has the largest number of listed Sharia-compliant stocks in the world," said Shariq Nisar, director of research and operations at Tasis.
"All Muslim countries of the Middle East and Pakistan put together do not have as many listed Sharia-compliant stocks as are available on the BSE."
Stocks will be reviewed every month to ensure they continue to meet the criteria – any which do not will be removed, officials say.