India finally has an Islamic index comprising 644 listed companies, which have been chosen on the basis of their compliance with the Islamic law, Shariat. The launching of such an index assumes significance in view of the fact that Islamic investment world over is growing by leaps and bounds.
According to a report by McKinsey, Islamic banking assets and assets under management are expected to increase to $1 trillion by 2010. Major index players in the world like Dow Jones and Standard and Poor have also launched faith-based indices.
The need for the index was felt as Islam forbids financial dealings in certain businesses, like those dealing with entertainment, hotels, gambling, tobacco, pork and alcohol are forbidden. Further, Shariat also forbids riba that is the giving or charging of interest.
The index was launched by Delhi Chief Minister Ms Sheila Dikshit on Thursday. The index itself is the outcome of collaboration between the Institute of Objective Studies, Delhi, the Indo-Arab Economic Cooperation Forum and the Eastwind Capital Advisers who have prepared the index.
This index is expected to help track the investment potential in India. It is also expected to be used both by institutional and individual investors the world over for portfolio management and benchmarking purposes. The selection of the companies that are Shariat compliant was done on the basis of a process as prescribed by the Shariat Supervisory Board.
The Islamic investment equity funds market is one of the fastest growing sectors within the Islamic financial system. At present, there are an estimated 100 Islamic equity funds worldwide. Contributing to the increase in Islamic funds is the viability of Islamic indices.