Shariah Islamic stock index opens in India
In accordance with Shariah law, Muslims are not permitted to invest in companies that derive significant benefit from interest, as Muslims consider this to be usury. In order to facilitate business-minded Muslims who wish to diversify their investment portfolios, the Bombay Stock Exchange (BSE), the Mumbai-based Taqwaa Advisory and Shariah Investment Solutions have launched an Islamic stock index of India’s top 50 companies that comply with Shariah law. Also known as the BSE TASIS Shariah 50, this index provides Muslims with the opportunity to invest in some of the most liquid stocks available on the BSE 500.
Islamic stock index reflects interest in fast-growing market
According to the Wall Street Journal, the Islamic stock index was up 0.5 percent this morning, which was an even more impressive performance than the BSE as a whole. Trading in Shariah-compliant products like mutual funds that do not generally produce excessive interest or bear excessive risk is popular in the Islamic world. Shariah finance – in which the BSE TASIS Shariah 50 is expected to play a major role – is a trillion-dollar industry worldwide, reports the WSJ. As one of the largest Muslim markets on earth resides in India, where 15 percent of the population (175 million) is Muslim, the demand for the Islamic stock index is not surprising.
An unbalanced credit-to-deposit ratio
A recent study by the Reserve Bank of India found that while the national credit-to-deposit ratio hovers around 74 percent, it is only 47 percent for Indian Muslims. What this means, according to the WSJ, is that compared to what Indian Muslims save, they borrow a great deal of money that could feasibly be used to open a business or buy assets at a lower rate than the rest of the Indian population. Experts predict that the BSE TASIS Shariah 50 may help smooth out that ratio for Indian Muslims, but it also remains likely that the Islamic stock index will make India a destination for foreign Islamic finance.