shariah compliant stocks
Post on 13-Apr-2017
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ContentsIntroduction2Objectives of study4Industry Profile5Company Profile6OUR MANAGEMENT6OUR ACHEIVEMENTS7Mission7Vision7Job Profile8Shariah Compliant Stocks9Meaning9Screening of Stocks10Volatility of Shariah Compliance11Equity Based Investment Options12Tata Ethical Fund12Taurus Ethical Fund13S&P BSE 500 Shariah index methodology14Nifty 500 Shariah Index Methodology16Nifty 50 Shariah Index Methodology17Literature review18Research Methodology20Data Analysis & Interpretation24Findings & Recommendations29Conclusion30References31
IntroductionThe world's economic centre of gravity is gradually shifting from the established, wealthy economies of Europe, Japan and North America to the emerging economies like China, India and South East Asia, with China and India projected to be the largest economies of the world in the next 50 years. Improving macroeconomic fundamentals, higher disposable incomes, emerging middle class, low cost and highly competitive workforce, investment friendly policies and progressive reform processes are all likely to combine to make a strong case for India to have a larger share in the overall investment pie.
With this sound economic base and with hundreds of companies complying to the Shariah laws, India offers a large economic opportunity for Islamic investors, who follow Shariah investment and therefore can't invest in interest-based ventures or in Islamically unethical ventures like tobacco, alcohol, fashion, gambling, vulgar entertainment and conventional finances like banks and non-banking financial institutions.
Realizing the growing need of Islamic investments in India, the Indian government has recently taken a number of steps in this direction. First, a high-level committee appointed by the government to prepare Indias future financial structure recommended interest-free banking for inclusion of Muslims in the financial sector. The Report draws its significance from the fact that this is first time an Indian finance committee has said something on the issue, which hitherto was considered quite sensitive in political circles. This is a good sign for Islamic investments in India. Taking a cue from these gestures, Indian corporate have also started placing themselves to capitalise on this big opportunity. The people not conversant with the principles of Shariah and its economic philosophy sometimes believe that abolishing interest from the banks and financial institutions would make them charitable, rather than commercial, concerns which offer financial services without a return. Obviously, this is totally a wrong assumption. According to Shariah, interest free loans are meant for cooperative and charitable activities, and not normally for commercial transactions, except in a very limited range. So far as commercial financing is concerned, the Islamic Shariah has a different set-up for that purpose. The principle is that the person extending money to another person must decide whether he wishes to help the opposite party or he wants to share his profits. If he wants to help the borrower, he must rescind from any claim to any additional amount. His principal will be secured and guaranteed, but no return over and above the principal amount is legitimate. Islamic banking (Arabic: ) is banking or banking activity that is consistent with the principles of sharia (Islamic law) and its practical application through the development of Islamic economics. As such, a more correct term for Islamic banking is sharia compliant finance.
Sharia prohibits acceptance of specific interest or fees for loans of money (known as riba, or usury), whether the payment is fixed or floating. Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited"). Although these prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent un-Islamic practices, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.
As of 2014, sharia compliant financial institutions represented approximately 1% of total world assets. By 2009, there were over 300 banks and 250 mutual funds around the world complying with Islamic principles and as of 2014 total assets of around $2 trillion were sharia-compliant. According to Ernst & Young, although Islamic Banking still makes up only a fraction of the banking assets of Muslims, it has been growing faster than banking assets as a whole, growing at an annual rate of 17.6% between 2009 and 2013, and is projected to grow by an average of 19.7% a year to 2018.
Objectives of studyPrimary Objective: To study performance of Shariah compliant index with respect to conventional stock indexes.
To understand concept of Shariah Compliant stocks. To understand mechanism of equity based Shariah compliant funds. To do a comparative analysis of Shariah indices and conventional indices. To find association between Shariah compliant index and conventional stock index.
Industry ProfileWhile Islamic compliant investment avenues are now becoming available in most countries, India has not seen large scale development. Other than a handful of Shariah compliant funds, currently India offers limited options for investors looking at Shariah compliant investing. However, this should not go to undermine the scope for Shariah compliant investment opportunities in India.Out of 6,000 BSE listed companies, approximately 4,200 are Shariah compliant. The market capitalization of these stocks accounts for approximately 61% of the total market capitalization of companies listed on BSE. This figure is higher even when compared with a number of predominantly Islamic countries such as Malaysia, Pakistan and Bahrain. The growth in the market capitalization of these stocks was more impressive than that of the non-Shariah compliant stocks.
The software, drugs and pharmaceuticals and automobile ancillaries sector were the largest sectors among the Shariah compliant stocks. They constitute about 36% of the total Shariah compliant stocks on NSE. Further on examining the BSE 500 the market capitalization of the 321 Shariah compliant companies hovered between 48% and 50% of the total BSE 500 market capitalization. Progress of Islamic finance in India
Company ProfilePragmatic Wealth ManagementPvt. Ltd. (PWM) founded by Mr. Imtiaz Merchant in the year 2009 is a Shariah Wealth Management Advisory company with clear focus on Islamic Investments. It aims to tap the hugely unexplored market of Shariah Compliant Investment. The company is registered with Registrars of Companies (ROC). The company also has approval from SEBI to run the stock broking business. PWM is of one of the pioneers of Shariah Investment Services equipped with strong experts having technical expertise as well. PWM endeavors to create awareness about investments in the Islamic Way, with a clear mission to popularize the investments through social responsibility and ethics for which PMW has developed a first of its kind magazine focusing on Islamic Finance, registered as 'Islami Tijara'.
Imtiaz Merchant- Managing DirectorMr. Imtiaz Merchant is a Commerce Graduate from Mumbai University and holds a diploma in Marketing Management. He is a Fundamental and Technical market Analyst, with 16 years of experience. Mr. Merchant is well-versed with the Islamic Finance Market and the Shariah Compliance norms for investments. He has spent years of extensive efforts to understand the principles of Islamic Finance and has been in constant discussions with Islamic Finance scholars and experts. He has the privilege to create Shariah Compliant Stock Universe and various investment portfolios for investment.
Ayzaz Rehman Motiwala- DirectorMr. Ayzaz Rehman Motiwala is a commerce graduate. He has 12 years of experience in stock market. He is also part of the research team ofPragmatic Wealth Management, and is good at picking stocks for investments based on fundamental studies. He has decent knowledge of Islamic investments.
Abdul Rashid Ansari- DirectorMr. Abdul Rashid is a business man in leather exports. Being Director of thePragmatic Wealth ManagementPvt. Ltd., he looks after the accounts and finance affairs of the company. Through his contact he is instrumental in getting business for the company.
Shariah Broking Services:Our company PWM has received the Stock Broking license from SEBI vide SEBI REG.NO. INB071490636 on July 28, 2013, and we are A.P. (Authorized Person) of Madhya Pradesh Stock Exchange. By virtue of being MPSE member, our clients can trade in both BSE & NSE. Our focus remains on research of the Shariah compliant companies; our past performances have demonstrated our outperformance in terms of returns on investments through our Advisory. We also provide online trading facilities to our trading members.MissionIn order to achieve the above goals, the board has decided to take up immediately the following tasks: Create Awareness for Halal Investment Products & Services through Conferences, Seminars, Workshops. Encourage investments the Shariah Way, as this investment avenue has been proved world over to be beneficial to investor community and the economic system. Identify, develop and facilitate Shariah Compliant investments products. To build a comprehensive Islamic wealth management company. Initiate dialogue with regulatory authorities (SEBI, RBI, and IRDA) to permit Islamic Investment, Finance and Islamic Insurance (Takaful). To facilitate Shariah Compliant investors to tap opportunities in the Indian Equity markets.Vision The goals of the company are to provide the best & cost efficient Financia