The new Shariah indexes are derived from the S&P CNX 500 and S&P CNX Nifty indexes, which are considered the leading gauges of the Indian equity market, according to the S&P announcement.
The S&P CNX 500 covers more than 90% of the total market capitalization and more than 80% of total traded volume on the National Stock Exchange (NSE), and is the complete benchmark for the Indian stock market. The S&P CNX Nifty represents the largest and most liquid companies listed on the NSE.
Each of the new indexes typically covers over 60% of the market capitalization of the parent index, though this can vary depending on the number of companies found to be compliant, the announcement said. Historical performance analysis, however, indicates that there is a high level of correlation between the underlying indexes and their new Shariah compliant versions.
The S&P CNX 500 Shariah comprises 263 companies with a market capitalization of In Rs 13,196 billion, while the S&P CNX Nifty Shariah comprises 40 companies with a market capitalization of In Rs 9,832 billion.
Standard & Poor’s Shariah Indexes are screened by Ratings Intelligence Partners, a Kuwait-based consulting company specializing in the Islamic investment market.
S&P Shariah Indexes undergo sector and accounting-based screens that exclude businesses that offer products and services which are considered unacceptable or non-compliant according to Shariah-law, such as advertising and media, alcohol, financials, gambling, pork, pornography, tobacco, and the trading of gold and silver as cash on a deferred basis.
More information is at www.shariah.standardandpoors.com.