Standard & Poor's, the world's leading index provider on Tuesday launches two new investable Shariah indices for the Indian equities market - the S&P CNX 500 Shariah and S&P CNX Nifty Shariah.
These new Shariah indices are derived from the S&P CNX 500 and S&P CNX Nifty indices, which are the leading gauges of the Indian equity market. The S&P CNX 500 covers more than 90% of the total market capitalization and more than 80% of total traded volume on the National Stock Exchange (NSE), and is the complete benchmark for the Indian stock market. The S&P CNX Nifty represents the largest and most liquid companies listed on the NSE.
"These new Shariah-compliant indices provide investors with a comparable investable portfolio while adopting explicit selection criteria defined by Islamic law. They are indicative of the appetite among investors for investable Shariah-compliant indices covering all types of markets," says Alka Banerjee, Vice President of Index Services at Standard & Poor's.
Suresh Narayan, CEO of India Index Services & Products Limited, said,"We are extremely pleased to be associated with Standard & Poor's for this initiative and offering these indices suited to client expectations."
Each of the new indices typically covers over 60% of the market capitalization of the parent index, though this can vary depending on the number of companies found to be compliant. Historical performance analysis, however, indicates that there is a high level of correlation between the underlying indices and their new Shariah compliant versions.
The S&P CNX 500 Shariah comprises 263 companies with a market capitalization of In Rs 13,196 billion, while the S&P CNX Nifty Shariah comprises 40 companies with a market capitalization of In Rs 9,832 billion.
Standard & Poor's Shariah Indices are screened by Ratings Intelligence Partners, a Kuwait-based consulting company specialising in the Islamic investment market. Ratings Intelligence Partners researchers interface directly with a dedicated Shariah Supervisory Board. The Board is comprised of a group of Islamic scholars whose role is to interpret business issues as well as financial practices and recommend actions in relation to Shariah index management.
S&P Shariah Indices undergo sector and accounting-based screens that exclude businesses that offer products and services which are considered unacceptable or non compliant according to Shariah-law, such as advertising and media (newspapers are allowed, sub-industries are analyzed individually), alcohol, financials, gambling, pork,
pornography, tobacco, and the trading of gold and silver as cash on a deferred basis. All S&P Shariah Index constituents are monitored on a daily basis to ensure that the indices maintain strict Shariah compliance. |
