Islamic Index Encourages Muslims 

to Invest in Bombay Stock Exchange
Spreading the Wings of Islamic Finance in India's Emerging Market

 

The Bombay Stock Exchange has launched a new 
stock index of companies that are compliant with the 
Islamic legal code, encouraging Muslims to invest in 
India's fast-growing stock market. 

Islamic law imposes restrictions on investing in 
companies that charge interest and those that sell 
products such as alcohol, weapons or tobacco. 

The index, called BSE TASIS Shariah 50, is composed 
of the 50 largest and most liquid stocks that adhere 
to Islamic law. The companies were chosen by the 
Taqwaa Advisory and Shariah Investment Solutions 
(TASIS), a Mumbai-based Islamic finance firm whose 
board members include legal experts and Islamic 
scholars. 

Stocks will be reviewed monthly for Shariah 
compliance, and non-compliant stocks will be 
removed. Additional companies will be added on a 
quarterly basis. 

"It will create a market for Indian Muslims," Shariq 
Nisar, the director of research and operations at 
TASIS, said in a statement. "We can provide 
opportunity to domestic investors so that they can 
invest their money without falling foul of their ethical 
and religious requirement. 

"A lot of Muslim investors who could have invested 
their money in stock market and benefited from it, 
they were not having this opportunity earlier." 

Islamic indexes already exist in other countries in the 
Middle East and Asia, including Pakistan and 
Indonesia, which have the two largest Muslim 
populations in the world. (India is third, with more 
than 150 million Muslims, or 13 percent of its 
predominantly Hindu population). 

The other countries' financial systems are not 
necessarily sophisticated enough to support large 
stock indexes. 

India's development in the past decade, however, 
allows it to support such a large index, which started 
Monday. "The BSE has the largest number of listed 
Shariah-compliant stocks in the world," Nisar said. 
"All Muslim countries of the Middle East and Pakistan 

 

put together do not have as many listed Shariah-
compliant stocks as are available on the BSE." 

The index is expected to encourage members of 
India's newly emerging Muslim middle class to invest, 
instead of saving money because of their conservative 
values. 

Guilt-Free Investing

"These people were just keeping the money under 
their pillows," Nisar said. "Many were investing either 
in gold or in real estate." 

The index will make it easier for Muslims to know 
which companies adhere to Shariah law, encouraging 
Muslims on a psychological level to invest. 

The new index will increase awareness of "financial 
investments amongst the masses and help enhance 
financial inclusion," Madhu Kannan, the managing 
director and chief executive of the BSE, said in a 
statement. 

Muslims, many of whom have been excluded from 
India's financial sector in the past because of Islamic 
law, will now be able to invest guilt-free.

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