In the past couple of months, we have seen the launch of some so-called sharia funds. What exactly are these and who can invest in them? Is it correct that they do not invest in banks and companies involved in alcohol production? How does their capital appreciate?
Mint covered sharia funds in its issue on 30 January. You may read this story
Sharia funds are those funds that follow shariah, the religious law of the followers of Islam, which has strictures regarding finance and commercial activities permitted for followers. Sharia forbids Muslims from receiving interest payments and from investing in companies involved in the production or sale of pork, alcohol, tobacco, pornography, gambling, non-Islamic finance or life insurance. Investment in these schemes is open for everyone. There are a lot of funds in India such as UTI, Kotak, Benchmark and Taurus that offer these schemes.
Considering the prevailing market levels and general sentiment, would it be wise to start a systematic investment plan (SIP) into an index fund for one year? I am aware that the performance of index funds is assessed with regard to (low) expense ratio and (low) tracking error. On this basis, which index fund would you recommend?
Personally, in such an adverse market scenario, I would not recommend an index fund for investment and would still prefer investment in other options.
However, if you understand the risk of this kind of investment, Nifty Benchmark ETS 2001 and UTI Sunder 2003 are better among the lot as they have the lowest expense ratio and have fared better in comparison to the benchmark and also against its peers.
Answers are based on a technical analysis of the markets and individual stocks. The views expressed on this page are not the newspaper’s opinion and are provided for information purposes by Vipul Verma. Readers are requested to do their own research before participating in the stock markets. Neither the paper nor the information provider will be responsible for any outcome based on information provided here.