Best Halal Stocks in India

What are Halal Stocks?

Halal stocks refer to shares in companies that follow Islamic principles. These companies avoid generating income from interest and steer clear of industries such as alcohol, gambling, and tobacco. For many investors in India, this way of investing is about more than just profits. It reflects a commitment to ethical choices and a sense of social responsibility. Halal investing enables individuals to align their financial investments with their values while pursuing their financial objectives.

About the Top Halal Stocks

• UltraTech Cement Ltd: UltraTech is India’s largest cement producer and a key player in the global cement industry. 
• Adani Enterprises Ltd: Adani Enterprises serves as the incubator for the Adani Group’s new businesses. 
• Hindustan Unilever Ltd: HUL is a leading fast-moving consumer goods (FMCG) company in India, offering a wide range of products in home care, beauty, personal care, and food segments.
• Maruti Suzuki India Ltd: Maruti Suzuki is India’s largest passenger car manufacturer, known for its fuel-efficient, affordable vehicles.
• Tata Consultancy Services Ltd: TCS is a global IT services, consulting, and business solutions provider under the Tata Group.

How to Invest in Halal Stocks?

Here is how you can invest in halal stocks in NSE:

1. Open a demat/halal share trading/stockbroker account. You can open a demat account with smallcase!
2. Conduct thorough research on the top halal stocks in India that interest you. Investors can use tools like the Tickertape Stocks Screener to do this. The screener offers 200+ built-in filters to choose from, and investors can select the parameters to research and generate different halal stocks list and conduct halal stock screening.
3. Place a ‘Buy’ Order on the top halal stocks of your choosing. 

Explore these Shariah-Compliant smallcases

Here is a Shariah-compliant smallcase that Halal Stock investors might be interested in:

Elystar AI Shariah Alpha smallcase: The Elystar AI Shariah Alpha portfolio provides a measured approach to targeting alpha over the Nifty 50 Shariah Index while maintaining controlled risk. This is a long-term-oriented portfolio. 

Disclosures for the Elystar AI Shariah Alpha smallcase.

Features of Shariah Investments

• The ‘Debt to Equity ratio‘ must not exceed 33%.
• Shariah indices exclude companies with Accounts Receivables/Market equity value equal to or exceeding 49%. 
• In Shariah compliant firms, revenue from non-compliant activities is permissible only if it constitutes less than 5% of total revenue. 

These principles are established by Shariah Boards, with 935 companies in the Nifty index found to be Shariah compliant.

What is Sharia Compliance?

Sharia-compliant stocks adhere to Islamic law, avoiding usury, gambling, and ambiguity. This means abstaining from investing in sectors involved in prohibited activities such as:

1. Institutions dealing with interest and excessive debt
2. Alcohol production and distribution
3. Pork-related products and non-halal food processing
4. Gambling
5. Adult entertainment
6. Tobacco
7. Marijuana
8. Cloning
9. Firearms and defence

What Makes a Stock Halal?

For a stock to be considered halal, it must adhere to specific Islamic guidelines. Sharia-compliant funds typically have a board of Islamic scholars who review and approve investments in accordance with standards established by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). Each fund follows the interpretations and judgments of its own Shariah Board.

The screening process involves two main steps:

• Business Activity Screening: Companies are excluded if they generate income from activities that contravene Sharia principles. This includes interest-based financial services, alcohol, pork products, gambling, adult entertainment, tobacco, recreational drugs like marijuana, genetic cloning, firearms, and defence-related industries.
• Financial Ratio Screening: The company’s financial health is also reviewed. To qualify, interest-bearing debt must be less than 33% of total assets. In addition, interest-related income or assets should not exceed 30% of the company’s average market capitalisation over the past 36 months.

Benefits of Investing in Halal Stocks

• Ethical Alignment: For Muslim investors, halal stocks align with their faith and ethical beliefs. Many halal stocks adhere to socially responsible investing standards, boasting strong ESG metrics.
• Risk Mitigation: Shariah compliant companies avoid interest-based borrowing, reducing leverage and potential risks. Halal investments typically undergo thorough vetting and maintain transparent business practices, enhancing transparency.
• Diverse Portfolio: Halal stocks cover various sectors, including healthcare, technology, manufacturing, and real estate, enabling portfolio diversification.
• Inclusivity: Shariah stocks in India appeal to a wider range of ethical investors beyond the Muslim community, attracting those prioritising responsible investing principles.

What are Halal Mutual Funds?

In 1984, Dr. M. Yaqub Mirza proposed the creation of the first US mutual fund adhering to Islamic principles, which led to the inception of the Amana Income Fund. As an active member of a Muslim investment group, Mirza encountered challenges in vetting securities for halal portfolios. He recognised the need for professional expertise and advocated for a mutual fund structure, ensuring that investors’ participation in profit and loss was ensured.