Ethical and Values-Based Investing in India – Conscience-Driven Wealth Creation
For investors who wish to avoid interest-bearing instruments, alcohol, tobacco, weapons, gambling or other excluded categories, India offers several SEBI-regulated mutual fund options that are screened for ethical or Shariah compliance. Values-based investing is not about compromising returns – it is about building wealth in a way that aligns with your beliefs and principles.
OakRise Fincorp provides personalised guidance on values-based and Shariah-screened investment options available in India. This service is available to any investor who prefers a conscience-driven approach – regardless of background, religion or motivation.
Values-Based Investment Options in India
Shariah-Screened Mutual Funds
SEBI-regulated equity mutual funds that are screened for Shariah compliance by independent Shariah boards. These funds exclude companies involved in interest-based banking, insurance, alcohol, tobacco, weapons, pork processing, gambling and entertainment.
Pure Equity Portfolios
Equity-only SIP portfolios that naturally avoid interest-bearing debt instruments. By investing exclusively in equity funds (not hybrid or debt funds), the portfolio is free from riba (interest) components.
Exclusion-Based Fund Selection
Screening regular equity funds for holdings in excluded sectors – ensuring your portfolio does not indirectly invest in companies whose primary business is alcohol, tobacco, conventional banking/insurance, weapons or gambling.
ESG Fund Options
Environmental, Social and Governance (ESG) funds that screen for broader ethical criteria – environmental responsibility, labour practices, governance standards and social impact. A broader values-based approach beyond religious screens.
Gold Investment as Alternative
Physical gold, Sovereign Gold Bonds and Gold ETFs as a permissible, interest-free asset class to complement an equity portfolio. Gold is traditionally considered a permissible investment and adds diversification.
Portfolio Review for Values Alignment
Review of your existing investment portfolio to identify and replace any holdings that do not align with your values – whether currently held through another advisor or directly with an AMC.
Available Shariah-Screened Funds in India
India currently has two prominent Shariah-compliant mutual fund options. Tata Ethical Fund is an actively managed equity fund that invests only in Shariah-compliant companies, screened by an independent Shariah advisory board. Nippon India ETF Shariah BeES tracks the Nifty50 Shariah Index – a subset of the Nifty50 that excludes non-compliant companies. Both are SEBI-regulated and available for investment through OakRise Fincorp.
It is important to note that Shariah compliance does not significantly restrict investment universe as much as one might expect – most Indian IT, pharmaceutical and consumer goods companies are Shariah-compliant. The major exclusions are banking stocks, which are typically 30-35% of the Nifty50, making these funds structurally different from broad market index funds.
Frequently Asked Questions
Are there Shariah-compliant mutual funds available in India?
Yes. Tata Ethical Fund (actively managed) and Nippon India ETF Shariah BeES (index-based) are SEBI-regulated mutual funds that are screened for Shariah compliance by independent Shariah advisory boards. Both are available for investment through OakRise Fincorp.
Do Shariah-screened funds offer competitive returns?
Shariah-screened equity funds have historically offered competitive long-term returns, though they differ from broad market performance due to the exclusion of banking stocks. In periods when banking stocks underperform (as was the case in 2020-21), Shariah-screened funds have outperformed broad market indices. In periods when banking stocks do well, they may lag. Over long periods, the performance has been broadly comparable.
Is this service only for Muslim investors?
No. This service is available to any investor who prefers a values-based, ethical or exclusion-based investment approach – regardless of background or faith. Some investors prefer ESG screens, some prefer Shariah screens, and some simply want to avoid investing in alcohol or tobacco companies. All are valid reasons to seek a values-aligned portfolio.
Can I invest in regular mutual funds and still avoid interest income?
Pure equity mutual funds do not hold debt instruments and therefore do not generate interest income within the fund. By restricting your portfolio to equity-only funds (large cap, mid cap, flexi cap) and avoiding debt, liquid or hybrid funds, you can build an interest-free portfolio from regular equity fund options.
What is the minimum investment for Tata Ethical Fund?
Tata Ethical Fund allows SIPs from ₹500/month and lumpsum from ₹5,000. Nippon India ETF Shariah BeES trades on the stock exchange like shares and can be bought in units – one unit is approximately the price of one Nifty Shariah index unit. We help with the complete investment process including KYC and account setup.