Bombay Stock Exchange launches Islamic index

India’s Bombay Stock Exchange (BSE) has introduced a new stock index which comprises companies that satisfy the legal codes of Islam.

The Tasis Shariah 50 index was created via guidelines from the Taqwaa Advisory and Shariah Investment Solutions (Tasis), a Mumbai-based Islamic legal and scholarly group.

The index consists of the 50 largest and most liquid Shariah compliant stocks within the BSE-500 index.

Many devout Muslims in India (who account for about 12 percent of the nation’s population) generally do not participate in the stock markets since Islam forbids investments in companies that are connected to alcohol and tobacco or those that generate profits through interest.

Madhu Kannan, BSE’s managing director and chief executive said that the new index would bring Islamic and other socially responsible investors into India’s equity markets.

This index will create increased awareness of financial investments among the masses and help enhance financial inclusion, he said.

Stocks in the index will be capped at a maximum individual weighting of 8 percent at rebalancing.

“If overseas investors want to invest in Shariah index in India, this is an invitation for people to come and invest, MH Khatkhatay, senior adviser to Tasis, told Reuters.

The BSE has the largest number of listed Shariah-compliant stocks in the world, said Shariq Nisar, director of research and operations at Tasis.

“All Muslim countries of the Middle East and Pakistan put together do not have as many listed Sharia-compliant stocks as are available on the BSE”

A number of Islamic-based financial products already exist in Europe and The U.S. including the iShares MSCI USA Islamic ETF.