Stock exchange officials have been receiving requests to start an index of stocks of companies complying with Jain religious strictures, on the lines of the Islamic Shariah index.
Shariah-compliant equity stocks typically avoid companies whose activities are not in keeping with Islamic principles. For example, they will not invest in liquor companies or those whose business is based on interest income-banks.
The Jain index could hypothetically invest in banks but might avoid companies whose operations involve non-vegetarian food.
Exchange officials and a member of the broking community confirmed some dialogue on the issue. “Some requests for similar indices like a Jain index, etc, have come. It is important to assess these requests further. If they are consistent, it is important to put in place systems and procedures like certifications, as in the case of Shariah,” said an official at the National Stock Exchange index subsidiary, India Index Services & Products Ltd (IISL).
Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, believes such a product would find traction. “We have been in touch with exchange officials. We see a lot of demand for such products. We have discussed internally the idea for a mutual fund product which would look to pick stocks based on considerations around this theme,” he said.
Any such index would have to draw upon the experience of religious scholars and investment experts, according to those in the index management business. For example, the creation of Shariah indices on the BSE and the NSE involved consultation with Islamic scholars. They identified businesses which would be in violation of Shariah principles.
A similar exercise would have to be carried out if an index is to be launched to cater to the 4.2 million Jains in India (2001 Census figure).
Vivek Mahajan, head of fundamental research at Aditya Birla Money, said although it is a small percentage of his overall client base, he would have had six to 10 clients who tend to avoid stocks they see as against the Jain philosophy.
“A lot of investors who are looking for ‘Jain stocks’ would already have a portfolio. A product based on the Jain doctrine would attract some money, although one will have to see how large such a pool would be,” he said.
Alka Banerjee managing director, strategy and global equity indices, at S&P Dow Jones Indices, said non-Islamic religious indices had been launched around the time of the global financial crises in 2008. “A few years ago, an exercise was carried out with Dharma indices, which was later disbanded on account of lack of demand… We haven’t received any specific demand but hypothetically this can be done by getting religious scholars on board, who can provide an assessment of what stocks can be included in the index,” she said.
The Dharma indices were aimed primarily at Hindus and Buddhists, although it could potentially reach out to Jains and Sikhs, according to a press statement issued at the time.
Interestingly, new indices have been launched by both of India’s two national exchanges in the calendar year.
Interestingly, the chief executive officer of a mutual fund with a Shariah-compliant fund said many of the investors are Jains. “A fair number of people are looking for ethical investment opportunities and there is a lot of overlap in terms of what is not allowed among Jains and Muslims,” he said.