Dow Jones starts Islamic index to track Indian stocks

In response to an increasing demand largely from its Gulf clients who want to see an Islamic India exposure, Dow Jones Indexes launched Dow Jones Islamic Market India Index on Wednesday.

The new index measures the performance of stocks traded on the Bombay Stock Exchange that passes screens for Sharia compliance.

"One of the benefits of the booming petro-liquidity is money expanding in South and South-east Asia and there are a lot of inquiries coming from our clients in the Gulf," said A. Rushdi Siddiqui, global director, Islamic Market Index Group, Down Jones Indexes.

"That was basically the initiative for us to look at India very carefully because it fits in a gap that's missing in the investor asset class base."

Clients also want to buy into the India success story, said Sumeet Nihalani, director Asia- Pacific sales, Dow Jones AER Company, and through this index "we would like to be able to give them the vehicle or product with each they can go to their customers or go into the market and leverage the opportunity."

Diverse sectors

Comprising 182 companies in diverse sectors, the India-specific Islamic index includes household blue chip names that have passed industrial and financial ratio screens for Sharia compliance such as Reliance Industries, Infosys Technologies, Tata Consultancy, Wipro Technologies, Ranbaxy, Dr. Reddy's Laboratories and Larsen and Toubro Ltd.

Excluded are 'sin sector' companies that are involved in alcohol, defence and weapons, entertainment, financial services, pork and tobacco.

According to a company statement, DJIM India Index is weighted by float adjusted market capitalisation and components are capped at 10 per cent.

Diversified nature of the Indian economy underscores the interest shown by the clients.

"The interesting thing about India versus the GCC from the sector point of view is that it is more diversified," added Siddiqui.

"Our interest is not just India composite. We are going to slice it and dice it into sectors, sizes and to styles, and that's the value that we are going to bring to India and to our clients in the Gulf who want to capture not the macro level but a vertical slice such as energy and pharmaceuticals."

Nihalani added that fin-ance and market professionals and investment bankers in India were also an impetus behind creating such an index which would aid them in creating funds and products for their customers.