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Shariah Funds

Shariah Funds

Shariah-compliant MF a hit with other communities too

The only Shariah-compliant mutual fund operating in India currently is the Tata Select Mutual Fund. This fund was instituted with an objective to provide medium to long-term capital gains and abstains from sectors such as liquor, tobacco, consumer goods, finance and banking, as well as other investments in interest-bearing securities.
The fact that the fund abstains from prohibited sectors has touched a chord with other religious communities, including the Jains. It also helps that Tata Select has given 40% annual returns to its shareholders since the fund’s inception in 1996. Ved Prakash Chaturvedi, Tata Mutual Fund’s Managing Director, however, says it is a mere coincidence that the fund’s holdings also appear to be Shariah-compliant.
”It’s too early for the mutual fund industry to think in terms of socially responsible funds that are quite popular in the West,” he says. “I do not think there is adequate awareness or demand for socially responsible funds in India just as yet.”
India’s mutual fund industry has around 35 companies, which manage a corpus of Rs 3,41,378 crore. There is currently no fund that bills itself as an ethical fund in the universe of mutual funds in India. Ethical funds, dozens of which are marketed in many developed markets, follow socially responsible investment strategies and stay away from stocks of those companies that manufacture tobacco, liquor and even defence equipment.

Shariah-compliant funds gain momentum in India

Mumbai: No investing in a company whose debt is at least one-fourth its assets. No investing in a company that makes or sells alcohol, pork or tobacco. No investing in a company that charges interest on the financial services it offers. No investing in a company whose interest income exceeds 3% of its total revenues.
These are a few of the tenets that a Shariah-compliant mutual fund follows. The Shariah is a code of Islamic law that regulates the conduct of human beings in their individual and collective lives, and Shariah-compliant mutual funds are fast gaining acceptance in India.
Rising demand for such funds has fund houses and even insurance companies lining up for a piece of the action. Case in point: Taurus Asset Management Co. Ltd, Benchmark Mutual Fund and Tata AIG Life Insurance Co. Ltd. Taurus Ethical Fund, which complies with the Shariah, collected at least Rs5 crore during its new fund offer period.
These funds are open to anyone who stands by the philosophy behind the Shariah, and follow the tenets of Islamic economic law. They don’t invest in companies involved in gambling and nightclub activities either.
Standard and Poor’s has also launched two major indices in the Indian market—S&P CNX 500 Shariah and S&P CNX Nifty Shariah.
Experts say investors who are keen on investing based on their personal beliefs or want to make socially responsible investments are opting for these funds, especially because returns on investment don’t seem to be compromised despite the restrictions the Shariah imposes.
Mohit Mirchandani, equities head of Taurus, says: “We looked at how the Shariah index in India has done from February 2006 to December 2008. The broader indices lost about 35%, and the Shariah indices also lost about 35%. So these indices are moving together.”
The global size of this market is estimated at $1 trillion (around Rs50 trillion), and this segment is expected to grow at 10-15% annually. Experts are specially optimistic about the scope of this segment in the country, and expect more fund houses to develop their own Shariah-compliant funds over the short and medium terms.
Sr.No. Industry Name % of Net Assets
1 Cash & Cash Receivables 76.1
2 Industrial Capital Goods 12.66
3 Software 3.79
4 Construction Project 3.58
5 Construction 3.2
6 Industrial Products 0.67
  Total 100
Type of Scheme
Launch Date
Fund Objective
 Fund Investment Strategy
Asset Allocation
Options Available
Load Structure
Minimum Application Amount
An open-ended equity fund
April 9, 1996
The investment objective of the scheme will be to provide income distribution  and/or medium to long term capital gains while at all times emphasising the  importance of capital appreciation.
The investments would be primarily in equities of select group of companies in  infrastructure, Petrochemicals, Engineering, Chemicals, Power Generation/  Distribution, Automobiles, Steel, cement, Oil and Gas, Refineries,  Tele- communications, Fertilizer, Space, Transport, Construction, Electronics  and Electricals, Dyes, Explosives, Paints, paper, Agrochemicals,  Biochemicals, Textiles, Compressors and various other allied manufacturing  industries etc. The fund continues its policy of non-investment in prohibited  sectors like Liquor, Tobacco, Consumer Goods, Finance and Banking and  other investments in Interest Bearing Securities.
Instrument Minimum Likely Around Maximum Upto Risk Profile
Equity & Equity Related Listed -- 100 100 High
Equity & Equity Related Unlisted - - 5 Low to Medium
Total : 100
NAV calculation on all business days.
Growth & Dividend

Entry Load:
For each Investment amount less than Rs. 2 Crores: 2.25%
For each Investment amount greater than or equal to Rs. 2 Crore:
No entry load will be charged on investment made by fund of fund scheme
Exit Load:
For each Investment amount less than Rs. 2 Crores: 1.00% if redeemed on or before expiry of 6 months from the date of allotment
For each Investment amount greater than or equal to Rs. 2 Crore:

Rs.5,000/- and in multiples of Re.1/- thereafter.