05-01-2007, 09:24 AM
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--><img src='style_emoticons/<#EMO_DIR#>/sad.gif' border='0' style='vertical-align:middle' alt='sad.gif' /><!--endemo--> Create Shariah index and watch Islamic funds flow in
SHAILESH MENON
TIMES NEWS NETWORK[ TUESDAY, MAY 01, 2007 04:02:39 AM]
MUMBAI: The Indian stock market may have been likened to a casino and a den of vice by some, but Shariq Nisar begs to differ. According Mr Nisar, an economist and expert in Islamic finance, the current share of the Indian Shariah compliant market capitalisation (at 61%) is the highest even when compared with a number of Islamic countries such as Malaysia (57%), Pakistan (51%) and Bahrain (6%).
Sectors such as computer software, drugs and pharmaceuticals and automobile ancillaries are all Shariah compliant. These sectors constitute about 36% of the total Shariah compliant stocks on the NSE.
Shariah, the canonical law of the followers of Islam, has strictures regarding finance and commercial activities permitted for believers. Arab investors only invest in a portfolio of âcleanâ 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.
In a research paper titled âIslamic investments opportunities in Indiaâ, Mr Nisar, writes: âThe growth in market capitalisation of Indian Shariah compliant stocks was found to be more impressive than the growth in market capitalisation of non-Shariah compliant stocks. Another remarkable finding of the study is that even when the number of Shariah compliant stocks was very limited, the share of Shariah compliant market capitalisation never went below 50% of the total market capitalisation.â
If investors in Islamic countries buy Mr Nisarâs logic then Indian markets could see a huge inflow of capital in search for âShariah compliant stocksâ. Says Ashraf Mohammadi, managing director, Idafa Investments: âAbout $600 billion-worth Islamic investments are locked up in fixed deposits around the world, waiting for an attractive, but ethical, market to invest in. A significant sum of Arab investments also flow into the small Pakistani and immature UAE markets. With a dedicated Shariah index and some regulatory steps, Indian securities market can open the floodgates on Islamic investments.
Currently, there are more than 800 Shariah compliant stocks on the exchanges. Pakistan, a favoured Islamic capital market investment destination, has only 30 Shariah compliant scrips out of some 700-odd companies.â
One key development that could set off the flood of this capital inflow is an index that tracks Shariah relevant stocks. Experts believe that given the stagnation in European markets, a low-performing bullion market and falling crude prices, Indian markets could have fared better with a dedicated equity index for Muslim investors. The absence of such an index is inhibiting the capital flow. Take for example, the US and Pakistan. The US has the Dow-Jones Islamic Market Index (DJIMI) and Pakistan the Meezan Islamic Fund Criteria.
World over, Islamic investors have begun demanding more sophisticated instruments for investing their money. They want these investment alternatives to comply with both Shariah standards and international norms of financial investments. âIn the past, observant Muslims were wary of being involved in financial investment vehicles for fear that they werenât compliant with Shariah. A Shariah compliant index includes only those companies whose business activities and financial ratios comply with Shariah norms,â said Alka Banerjee, vice-president, Global Index Management, Standard & Poorâs, which recently launched its headline Shariah-compliant indices â the S&P 500 Shariah (for the US), S&P Europe 350 Shariah and the S&P Japan 500 Shariah.
Lack of awareness is a major impediment in the propagation of Islamic investments. âIt is the religious requirement of a Muslim to be invested; rather it is un-Islamic to hold money. Interest is forbidden, but sharing risk and responsibility that is sharing profit and loss is acceptable. Equity investing is wholly acceptable under Shariah as long as it is in companies compliant with the Shariah rules,â says Zafar Sareshwala, managing director, Parsoli Investments.
shailesh.menon@timesgroup.com
--><img src='style_emoticons/<#EMO_DIR#>/sad.gif' border='0' style='vertical-align:middle' alt='sad.gif' /><!--endemo--> Create Shariah index and watch Islamic funds flow inSHAILESH MENON
TIMES NEWS NETWORK[ TUESDAY, MAY 01, 2007 04:02:39 AM]
MUMBAI: The Indian stock market may have been likened to a casino and a den of vice by some, but Shariq Nisar begs to differ. According Mr Nisar, an economist and expert in Islamic finance, the current share of the Indian Shariah compliant market capitalisation (at 61%) is the highest even when compared with a number of Islamic countries such as Malaysia (57%), Pakistan (51%) and Bahrain (6%).
Sectors such as computer software, drugs and pharmaceuticals and automobile ancillaries are all Shariah compliant. These sectors constitute about 36% of the total Shariah compliant stocks on the NSE.
Shariah, the canonical law of the followers of Islam, has strictures regarding finance and commercial activities permitted for believers. Arab investors only invest in a portfolio of âcleanâ 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.
In a research paper titled âIslamic investments opportunities in Indiaâ, Mr Nisar, writes: âThe growth in market capitalisation of Indian Shariah compliant stocks was found to be more impressive than the growth in market capitalisation of non-Shariah compliant stocks. Another remarkable finding of the study is that even when the number of Shariah compliant stocks was very limited, the share of Shariah compliant market capitalisation never went below 50% of the total market capitalisation.â
If investors in Islamic countries buy Mr Nisarâs logic then Indian markets could see a huge inflow of capital in search for âShariah compliant stocksâ. Says Ashraf Mohammadi, managing director, Idafa Investments: âAbout $600 billion-worth Islamic investments are locked up in fixed deposits around the world, waiting for an attractive, but ethical, market to invest in. A significant sum of Arab investments also flow into the small Pakistani and immature UAE markets. With a dedicated Shariah index and some regulatory steps, Indian securities market can open the floodgates on Islamic investments.
Currently, there are more than 800 Shariah compliant stocks on the exchanges. Pakistan, a favoured Islamic capital market investment destination, has only 30 Shariah compliant scrips out of some 700-odd companies.â
One key development that could set off the flood of this capital inflow is an index that tracks Shariah relevant stocks. Experts believe that given the stagnation in European markets, a low-performing bullion market and falling crude prices, Indian markets could have fared better with a dedicated equity index for Muslim investors. The absence of such an index is inhibiting the capital flow. Take for example, the US and Pakistan. The US has the Dow-Jones Islamic Market Index (DJIMI) and Pakistan the Meezan Islamic Fund Criteria.
World over, Islamic investors have begun demanding more sophisticated instruments for investing their money. They want these investment alternatives to comply with both Shariah standards and international norms of financial investments. âIn the past, observant Muslims were wary of being involved in financial investment vehicles for fear that they werenât compliant with Shariah. A Shariah compliant index includes only those companies whose business activities and financial ratios comply with Shariah norms,â said Alka Banerjee, vice-president, Global Index Management, Standard & Poorâs, which recently launched its headline Shariah-compliant indices â the S&P 500 Shariah (for the US), S&P Europe 350 Shariah and the S&P Japan 500 Shariah.
Lack of awareness is a major impediment in the propagation of Islamic investments. âIt is the religious requirement of a Muslim to be invested; rather it is un-Islamic to hold money. Interest is forbidden, but sharing risk and responsibility that is sharing profit and loss is acceptable. Equity investing is wholly acceptable under Shariah as long as it is in companies compliant with the Shariah rules,â says Zafar Sareshwala, managing director, Parsoli Investments.
shailesh.menon@timesgroup.com