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BSE TASIS SHARIAH 50

 

Background on Islamic Finance and Shariah Compliance

The preferred Islamic investment format is equity. However equity comes along with ownership. Hence Islamic investors have to ensure that the selected company’s business and financial activities are not repugnant to Shariahnorms. Due to the exigencies of modern business and particularly the pervasiveness of interest based transactions, Shariah scholars have arrived at minimum compliance criteria which, while excluding companies in gross violation, also provide investors with a reasonably wide choice of Shariah-compliant equities. These minimum guidelines, however, are not uniformly applied by all Shariahadvisors. Investors seeking strict adherence to Islamic canonical law should therefore seek to use financial products that utilize an advisor with as thorough and conservative an approach as possible. Owing to the strong economic growth achieved by India in recent years there is an increasing interest from investors, especially those from countries with large Islamic population, in Shariah compliant investment options in India. To help such investors track listed Shariah compliant companies and their performance, BSE & TASIS have joined hands to launch BSE-TASIS Shariah 50 Index.
Brief introduction of TASIS
TASIS (Taqwaa Advisory and Shariah Investment Solutions) is India’s premier Shariah Advisory institution associated with the vast majority of Shariah compliant products available in the country today. It was founded by a group of finance and investment professionals who realized the need for a credible organization for providing guidance and support to individuals and corporations having an interest in the nascent but rapidly growing Islamic finance industry in India. TASIS specializes in Shariah advisory, product structuring, monitoring and Shariah certification. Currently it advises Indian companies, including government owned enterprises and those from the private corporate sector, in matters related to the application of Shariah law in business matters. Scholars on TASIS’s Shariah Board are based in North America, Europe and India, and are public figures who are highly reputed in their respective fields of specialization. The criteria employed by TASIS, in most cases, is more conservative than other Shariah advisory bodies.
Index Description (Fact Sheet)
The BSE-TASIS Shariah 50 Index (“Index”) includes the top 50 companies in India that have passed TASIS’s stringent Shariah compliance norms. The Index is a Cap Weighted Free Float Market Capitalization weighted Index comprised of BSE listed Shariah compliant Companies which are part of the BSE-500 Index. The Index has been back-tested from 1st January 2008 (Base Date) with the base index value of 1000. The Index is rebalanced on a quarterly basis i.e. end of March, June, September and December quarters. There shall not be any intra-review inclusion to the Index. However, if an existing constituent becomes non-Shariah compliant due to changes in financials or any corporate action, it may trigger exclusion of the constituent from the Index immediately. Companies are reviewed for Shariah compliance by TASIS on a monthly basis.

 Index Specification

Base Date 
1st January, 2008
Base Index Value
1000
Date of Launch
 27th December, 2010
Method of calculation
Number of scrips
50
Capping Stock level Capping at 8%
Index Constituents
Index calculation frequency
Real Time
Index calculation and Maintenance
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Index Reach
Market Capitalization and Turnover Coverage
Historical Values of Index
Historical Replacements
Historical Notices

 BSE TASIS Shariah 50 Index - Stock Selection Criteria

  

1      Eligible Universe: Companies forming part of BSE-500 Index and Shariah compliant companies would be considered for inclusion

 

2      Rank all companies on average free-float market capitalisation and average turnover for preceding 3 months

 

3      Calculate final rank giving weightage of 75% to rank on free-float market capitalisation and 25% to rank on turnover

 

4      Review frequency: Quarterly i.e. March, June, September & December

 

5   Shariah Compliance Review: Monthly

 

6      For base composition - Included top 50 companies by Final Rank.

 

7      On-going review:

 

a.     Mandatory exclusions: If the existing constituent ranks beyond 70 (i.e. 71, 72….) by final rank the company will be excluded

 

b.    Mandatory Inclusions: If a non constituent ranks within 30 (i.e. 1 to 30) than the company will be included.

 

8        Maximum weight of any constituent shall be capped at 8%. The constituent weightage shall be reviewed at the time of inclusion/exclusion of a stock and on monthly rebalancing. However, between any rebalancing, weightage of any index constituent can exceed 8%.

Note:

If an index constituent is traded under the 'Ex-Entitlement' basis it will be excluded from all BSE Indices. This is done because during this period BSE is unable to ascertain the valuation of the constituent and valuation of a constituent is required for Index calculation.