Shariah funds have a huge market in India, say experts.
After Goldman Sachs, Taurus and Tata, SBI Mutual Fund is set to launch its Shariah compliant fund in December.
Speaking about the rationale of the launch, Dinesh Khara, Managing Director & Chief Executive Officer, SBI Mutual Fund said, “The fund is meant for investors of all communities. The main aim is to provide long term capital appreciation by investing in stocks that comply with Shariah laws.”
The scheme will invest a minimum of 90% in equity and up to 10% in cash and money market instruments. Benchmarked against S&P BSE 500 Index, the scheme will have an exit load of 1% if investments are redeemed within 1 year from the date of allotment of units. The fund will be managed by Ruchit Mehta.
“There are approximately 700 companies following the Shariah principle. We will select stocks on the basis of prevailing BSE shariah filter,” adds Dinesh Khara. Shariah funds are not permitted to invest in companies engaged in marketing/production/offering of alcoholic beverages and casinos, tobacco, pork, destructive weapons, entertainment and banking. SBI has roped in research agency called Ratings Intelligence which has assembled a Shariah committee containing prominent scholars who guide the agency while screening stocks.
According to the fund’s offer document, the fund will invest in stocks across market capitalization. The portfolio will have a blend of growth and value stocks.
Shariah based funds have not taken off in a big way in India. “Shariah funds have been launched with the aim of targeting a particular community. However, fund houses are yet to tap this market fully. Lack of awareness about Shariah funds is also an area of concern,” says M S Shabbir of SenSage Financial Services.
Industry experts feel that there is a great scope for Shariah funds in India. They say that more AMCs should come up with these types of funds as there is a demand not only from Muslim community but also from Jain and Christian investors.
If marketed well, some feel that Shariah funds can attract large investments. “India has a huge population and there is a demand for such funds. It is a niche market. Fund houses should promote their Shariah funds aggressively to attract investors,” says Hemant Rustagi of Wiseinvest Advisors.
The
existing Shariah funds of Tata, Goldman Sachs and Taurus collectively manage
Rs. 249 crore as on October 2014.
