Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Ethical Investing:Examining the Performance of Indian Shariah Funds Vis-A-Vis Shariah Index


Affiliations
1 Department of Economics, New Alipore College, Kolkata, West Bengal, India
2 Department of Commerce, New Alipore College, Kolkata, West Bengal, India
     

   Subscribe/Renew Journal


Ethical investment is an important part of 'Socially Responsible Investment' (SRI) that is based on investors' ethical beliefs and values. Shariah-compliant investment (SCI) is one such practice. In this backdrop, the primary objective of the study is to explore the performance of the existing two actively managed Shariah-compliant equity funds, namely, Tata Ethical Fund and Taurus Ethical Fund, from the perspective of risk-return parameters. Another objective is to analyse the performance of the Shariah index CNX 500 Shariah in relation to these two funds. The study is based on secondary data. The period of study is from March, 2010 to March, 2015. Measures like Annual return, Compound Annual Growth Rate (CAGR), Risk-adjusted CAGR, Jensen alpha, R-squared (R2), and beta have been used. The funds have exhibited superior risk-adjusted return. Further, funds are defensive in nature in most of the times, and are adequately diversified. Again, fund managers have superior stock selection skills. Returns from "Systematic Investment Plan" (SIP) are very much satisfactory. Moreover, the performance of Shariah index is inferior to that of the Tata Ethical Fund in respect of all parameters. Shariah-compliant funds have great potential to garner more investment from Shariah-conscious Indian investors.

Keywords

CAGR, Ethical Fund, Shariah-Compliant Fund, Shariah Index, SIP.
Subscription Login to verify subscription
User
Notifications
Font Size


  • Davis, G. S. (2008). Shariah Compliance Principles. Retrieved from http://www.investopedia.com/stockanalysis 2008/shariah_compliance_principles_gs_aig.aspx, on 25/10/2014.

  • Dharani, M., & Natarajan, P. (2011). Equanimity of risk and return relationship between shariah index and general index in India. Journal of Economics and Behavioral Studies, 2(5), 213-222.

  • Elfakhani, S., Hassan, M. K., & Sidani, Y. (2005). Comparative performance of Islamic versus secular mutual funds. Retrieved from http://www.middle-east-studies. net/wp-content/uploads/2010/09/sidani-Islamic Mutual Funds. pdf, on 18.05.2015

  • Girard, E.,& Hassan, M. K.(2005). Faith-Based InvestingThe Case of Dow Jones Islamic Indices Reexamined. University of New Orleans Working Paper, New Orleans, LA.

  • Gregory, A., Matatko, J., & Luther, R. (1997). Ethical unit trust financial performance: Small company effects and fund size effects. Journal of Business Finance and Accounting, 24(5), 705-25.

  • Habib, M., & Islam, K.U. (2014). Performance of Shariah Compliant Index: A Comparative Study of India and Malaysia. International Journal of Interdisciplinary and Multidisciplinary Studies (IJIMS), 1(6), 231-241.

  • Hakim, S., & Rashidian, M. (2002). Risk & return of Islamic stock market indexes. Paper Presented at the 9th Economic Research Forum Annual Conference in Sharjah, U.A.E. on October 26-28, 2002.

  • Hassan, M. K., & Seif, I. T. (2005). Speculative Bubbles in Islamic Stock Market- Empirical Assessment. MIHE Working Paper, Leicester, U.K.

  • Hela, M., Hameedah, S., & Anissa, C. (2015). The impact of financial crisis on Islamic and conventional indices of the GCC countries. The Journal of Applied Business Research, 31(2), 357-370.

  • Khan, M. A. (2013). Investing in Shariah Compliant Stocks in India.Retrieved from http://www.maeeshat.in/2013/10/ investing-in-shariah-compliant-stocks-in-india, on 31/10/2014.

  • Kreander, N., Gray, R. H., Power, D. M., & Sinclair, C. D. (2002). The financial performance of European ethical funds 1996–1998. Journal of Accounting and Finance, 1, 3 – 22.

  • Luther, R., & Matatko, J. (1994). The performance of ethical unit trusts: Choosing an appropriate benchmark. British Accounting Review, 26, 77-89.

  • Mallin, C., Saadouni, B., & Briston, R. (1995). The financial performance of ethical investment trusts. Journal of Business Finance and Accounting, 22 (4), 483-496.

  • Mansor, F., & Bhatti, M. I. (2011). Risk and return analysis on performance of the Islamic mutual funds: Evidence from Malaysia. Global Economy and Finance Journal, 4(1), 19-31.

  • Rosen, B. N., Sandler, D. M., & Shani, D. (1991). Social issues and socially responsible investment behavior: A preliminary empirical investigation. Journal of Consumer Affairs, 25(2), 221-234.

  • Shakir, U., & Dima, J. (2010). Institutional investors and corporate social responsibility: The role of Islamic financial institutions. International Review of Business Research Papers, 6(1), 619-630.

  • Williams, G. A. (2005). Some determinants of the socially responsible investment decision: A cross country study. Journal of Behavioral Finance, 8(1), 43-57.

  • http://bluechipindia.co.in

  • http://blogs.wsj.com/indiarealtime/2014/11/28/ are-shariah-funds-in-india-a-good-investment/

  • http://www.dnaindia.com/money/report-shariah-compliantmutualfunds-draw-jain-investors-2045164

  • http://www.pwc.com/en_US/gx/financial-services/islamicfinanceprogramme/pdf/shariah-compliant-funds.pdf

  • http://www.taurusmutualfund.com/

  • www.tatamutualfund.co

  • www.nseindia.com


Abstract Views: 320

PDF Views: 0




  • Ethical Investing:Examining the Performance of Indian Shariah Funds Vis-A-Vis Shariah Index

Abstract Views: 320  |  PDF Views: 0

Authors

Samarpita Seth
Department of Economics, New Alipore College, Kolkata, West Bengal, India
Samyabrata Das
Department of Commerce, New Alipore College, Kolkata, West Bengal, India

Abstract


Ethical investment is an important part of 'Socially Responsible Investment' (SRI) that is based on investors' ethical beliefs and values. Shariah-compliant investment (SCI) is one such practice. In this backdrop, the primary objective of the study is to explore the performance of the existing two actively managed Shariah-compliant equity funds, namely, Tata Ethical Fund and Taurus Ethical Fund, from the perspective of risk-return parameters. Another objective is to analyse the performance of the Shariah index CNX 500 Shariah in relation to these two funds. The study is based on secondary data. The period of study is from March, 2010 to March, 2015. Measures like Annual return, Compound Annual Growth Rate (CAGR), Risk-adjusted CAGR, Jensen alpha, R-squared (R2), and beta have been used. The funds have exhibited superior risk-adjusted return. Further, funds are defensive in nature in most of the times, and are adequately diversified. Again, fund managers have superior stock selection skills. Returns from "Systematic Investment Plan" (SIP) are very much satisfactory. Moreover, the performance of Shariah index is inferior to that of the Tata Ethical Fund in respect of all parameters. Shariah-compliant funds have great potential to garner more investment from Shariah-conscious Indian investors.

Keywords


CAGR, Ethical Fund, Shariah-Compliant Fund, Shariah Index, SIP.

References