Category Archives: Invest

Sharia 50 Index by Bombay Stock Exchange

The BSE TASIS Shariah 50 index, launched on Monday, consists of the 50 largest and most liquid Shariah compliant stocks within the BSE 500 Index. It is the first Shariah compliant equity index in India to be publicly disseminated on a real-time basis, providing a new tool for use by Islamic and other socially responsible investors to track the performance of India’s largest and most liquid Shariah compliant stocks.

BSE has partnered with TASIS, the premier Indian Shariah advisory firm to ensure that all stocks included in the BSE TASIS Shariah 50 meet the strictest possible Shariah compliance norms. Stocks are included through two types of screening, business screening and interest activity screening. Business screening ensures that companies selected are not in the business that derives significant benefit from interest or the sale of other goods and services such as alcohol, tobacco, firearms, vulgar entertainment etc. Interest Activity Screening ensures that companies involved in interest-bearing activities are within Shariah tolerance levels.

Not only Muslims, but any socially responsible investors of any faith may find this index and related investment products useful as companies deemed to be socially harmful are removed from the index.

As BSE claims in its fact sheet, the Shariah 50 has outperformed the SENSEX by nearly 25% and the BSE 500 by over 30% over its back-test horizon (beginning 1/1/08). Over this period, annualized volatility for the Shariah 50 was also less than both SENSEX and the BSE 500 by nearly 5 percentage points.

Now for individuals who stay away from investing in stock market with fear of non-compliance with Sharia principle can refer to this index to find companies comply with Sharia principles. It is updated every month to drop any company that ceased to be in compliance and new companies are added every quarter in place of dropped companies. Daily price movement can be seen here. For more information on the individual company, please click on the company name below.

List of Companies

ABB Dr Reddys Lab Mphasis
ACC Exide Inds MRF
Alstom Projects Gail India Nestle India
Ambuja Cements Glaxosmithkl Cons ONGC
Areva T&D Godrej Cons Opto Circuits
Ashok Leyland Grasim Inds PTC India
Asian Paints Hero Honda RIL
Bajaj Auto Hindalco Inds Siemens
BEML Hindustan Copp Sterling Intl
Bharti Airtel Hindustan Unilever Tata Global Beverages
BHEL Lanco Infra TCS
Castrol India Lupin Tech Mahindra
Cipla Mahindra & Mahindra Thermax
Colgate Palmolive Mangalore Ref Titan Inds
Crompton Greav Maruti Suzuki Ultratech Cem
Cummins India Mcleod Russel Voltas
Dabur India Wipro

Sectorwise Weightage

Sl No Sector %
1 Oil & Gas 31.59
2 Transport Equipments 13.36
3 Information Technology 12.44
4 Capital Goods 8.94
5 FMCG 8.47
6 Healthcare 6.39
7 Telecom 5.23
8 Housing Related 4.00
9 Metal,Metal Products & Mining 3.85
10 Textile 1.84
11 Chemical & Petrochemical 1.55
12 Consumer Durables 0.88
13 Power 0.88
14 Diversified 0.58
Total 100.00

Related Links:

BSE TASIS Shariah 50 Index Factsheet.pdf

Scripwise Price Movement in SHARIAH 50


Know the Basic for Stock Market Investing

Don’t put all your eggs in one basket! Don’t put all your savings in stock market! Don’t put all your investment in one company! – Diversify

Diversify into a number of good companies – No body knew precisely beforehand that Satyam Computers, which was fourth largest IT company in India, would end up in such a mess! So how many companies to invest in? Ideal number is 30 companies – 50% in 10 companies, 30% in second 10 and 20% in next 10. If you start with a small amount and add small amount gradually, it is not possible to invest in 30 companies in one go of course! In this case, invest systematically and increase the number to 30 step by step.

Diversify into large, medium and small companies – Large cap companies are safer. Small and medium companies can be multibagger but come with huge risk! How much in each? It depends on your risk appetite. Small and mid cap companies can give huge return, but it comes with huge risk. If you want to be on safer side and more cautious, you may limit your exposure to small-mid cap to 25% of total value of your portfolio or even less.

Diversify into different sectors and industries – No body knew beforehand the dot-com bubble would bust! How many industries and sector to invest in? When you invest 30 companies, make sure that all are not from same industry or few sectors! You can easily select 30 companies from 5-10 sectors! For example, 3-5 companies from Automobile – Hero Honda, M&M, Maruti, Ashok Leyland, Bajaj Auto etc. 3-5 companies from IT – NIIT Technologies, Geometric, Tech Mahindra, Infosys, Wipro etc.

Oh! So shall I buy all those companies selected from the different sectors right away? No, you have to see at what price are you going to buy? The current price may be far too high to enter. While some companies are available at bargain price, some are very expensive! So buy those which are available at a bargain right away and wait for those which are expensive to come down to a reasonable level.

So which is expensive and which is cheap?  A share of Hero Honda is traded at Rs. 1,855.00 while a share of NTPC is traded at Rs. 204.00. Does it mean Hero Honda is more expensive than NTPC? Not really! Wondering why? It looks too complicated for you? It is not a complex theory, it is just common sense. Would you compare the face value of a 1kg packet of rice of one brand with that of 2kg of a different brand? No, you would take the equal weight to compare. What about the face value of 1kg of rice with 1kg of salt? Is it comparable? The same principle applies here.

It is not the share price alone than determines the fair value. How many shares are outstanding for the company? How much is company worth on various parameters and how much is it valued by market? And decide whether buying at current price is really worth?

Building a good portfolio of shares is a gradual process! You need a lot of patience to build wealth through investing in shares!


Invest in Gold Through Dubai Gold Securities

Throughout the centuries, gold has managed to become a profitable investment vehicle for millions of people around the world. Despite geopolitical instabilities, warfare, natural disasters, and economic meltdowns, this commodity has not only survived but has substantially thrived when compared to the world’s leading currencies. During the last 10 years, gold surged 338.21%. Central banks, mutual funds, and regular investors have always diversified their stock and bond portfolios with gold for the purpose of getting a great return on their investment and offset long-term inflationary concerns.

Graph: www.goldprice.org

One of the most cost effective and easiest ways to invest in gold is through exchange-traded funds. Essentially, investors can purchase shares that are 100% backed by gold. The Shariah compliant Dubai Gold Securities (DGS) offer investors the ability to purchase shares that are directly tied into the daily spot price of gold. Dubai Gold Securities (DGS) are traded on NASDAQ Dubai under the symbol GOLD, and can be bought through most regulated broker dealers. There is no minimum or maximum transaction size, however, the relative level of commissions charged by your broker or financial advisor may influence the minimum transaction size.

Each Dubai Gold Securities share is equivalent to approximately one tenth of one fine troy ounce of allocated gold bullion. For each Dubai Gold Security in issue there is a corresponding amount of gold held in the vaults of the Custodian. The issuer (DGS LLP) has designated HSBC Bank to act as the independent custodian of the London based vault that stores all investor gold bullion. As of July 2010, there are 50,000 securities in issue that represent 13 uniquely identifiable London good delivery bars which are being held for investors by the custodian. DGS LLP also assesses a reasonable management fee and offers full website access to daily investor gold bar holdings. The Shariah Supervisory Board conducts regular audits of all DGS operations as well as performs physical inspections of the vault to insure continuous compliance with Islamic Law.

DGS LLP offers retail investors the unique and affordable opportunity of buying and selling gold without incurring the enormous costs associated with physical metal bar maintenance and insurance. To invest in gold through Dubai Gold Securities during these turbulent times will undoubtedly add considerable value to any portfolio. It’s important to keep in mind that gold is not affected by national fiscal policies. Most economic cycles are sensitive to non-discretionary spending, inflation or corporate sector earnings and as a result, currencies have always experienced a steady decline in purchasing power and will continue to do so in the near future.

However, gold carries no credit risk and is highly liquid. This makes it possible for investors to engage in 24 hour trading at the Nasdaq Dubai Exchange, capitalize on price fluctuations and easily increase or decrease their market exposure, as they deem necessary. Wise investors who are interested in preserving their wealth and establishing an effective hedge against the inflation should look no further than investing in gold.