Shariah indices weather the storm

Shariah indices weather the storm


Faith-based investing seems to have kept the faith of the investors alive in the market crash that saw wealth of the market getting eroded in billions.
Compared to their respective benchmarks, Islam-compliant Shariah Indices have fallen quite less. Shariah indices exclude stocks of businesses considered unethical as per Islamic principles.
While benchmark S&P CNX Nifty has plunged more than 7 per cent since February this year, the S&P CNX Nifty Shariah index has fallen only 4 per cent.
Similarly, CNX 500 index has dropped 10.15 per cent but the CNX 500 Shariah index has fallen only 7 per cent. The best performer in this cluster has been Parsoli’s Islamic Equity Index (PIE), which has plummeted only 2 per cent.

Parsoli Corporation managing director Zafar Sareshwala says, “We don’t have an exposure to banks and financial institutions, which have been battered the most in the recent market turmoil.
“Even brokerages are completely barred because most of the players among broking firms are highly leveraged. These firms get their income though margin trading and trading in futures and options, which Shariah doesn’t permit.”
Parsoli’s equity index removes companies that have a debt to market capitalisation of 33 per cent or above. Even companies whose account receivables are greater than or equal to 45 per cent of their market cap are not included in the index.
Adds Sareshwala, “Right now, we have more than 13,000 clients and we are adding a significant number every month. Even in difficult times (in market) such as these, we are not facing any problems. In fact, there is a lot of interest among investors to follow ethical investing.”
Not only Islamic investment, but faith-based investing is also fast catching up among other classes of investors.
According to Sareshwala, almost 25 per cent of their clients are non-Islamic. Even institutions are waking up to this fact. Parsoli is soon going to start an institutional desk and is in talks with various mutual fund houses to launch a product based on the index, he adds.
However, experts feel that Islamic investing or faith-based investing is still at a nascent stage in India. While globally, Islamic finance market is growing at over 10 per cent, in India, investors are still addicted to the bull runs of Sensex, says an analyst.

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