Top Halal Stocks to Invest in NSE in the Indian Stock Market (2024)
Discovering ethical investment avenues in India goes beyond traditional finance. Halal stocks, for example, are rooted in Islamic principles and Sharia law compliance. They offer a unique opportunity for conscientious investors. Delving deeper into this burgeoning market, we unveil a comprehensive list of Halal shares in India. Join us as we navigate the realm of ethical investing and explore the potential of Halal stocks.
Top 10 Halal Stocks in India for 2024
Here are the top 10 halal stocks from Nifty 50, sorted from highest to lowest market cap:
| Name | Sub-Sector | Market Cap (Rs. in cr.) | Close Price (Rs.) | PE Ratio | 5Y CAGR (%) |
|---|---|---|---|---|---|
| Reliance Industries Ltd | Oil & Gas - Refining & Marketing | 2,027,950.54 | 2,996.25 | 29.13 | 21.49 |
| Tata Consultancy Services Ltd | IT Services & Consulting | 1,646,772.53 | 4,502.00 | 35.87 | 15.23 |
| Infosys Ltd | IT Services & Consulting | 775,647.70 | 1,880.25 | 29.57 | 18.77 |
| Hindustan Unilever Ltd | FMCG - Household Products | 655,817.91 | 2,792.80 | 63.81 | 8.33 |
| HCL Technologies Ltd | IT Services & Consulting | 453,886.20 | 1,676.15 | 28.91 | 25.45 |
| Sun Pharmaceutical Industries Ltd | Pharmaceuticals | 423,398.65 | 1,750.65 | 44.21 | 33.39 |
| Maruti Suzuki India Ltd | Four Wheelers | 384,229.81 | 12,276.35 | 28.49 | 14.61 |
| Adani Enterprises Ltd | Commodities Trading | 355,190.15 | 3,099.05 | 109.64 | 89.48 |
| UltraTech Cement Ltd | Cement | 322,809.49 | 11,309.40 | 46.08 | 24.13 |
| Titan Company Ltd | Precious Metals, Jewellery & Watches | 315,829.40 | 3,604.40 | 90.34 | 27.69 |
Disclaimer: Please note that the above list is for educational purposes only, and is not recommendatory. Please do your own research or consult your financial advisor before investing.
Note: The data in the halal stocks list is from 22nd August 2024. However, for real-time updates on stock prices and market trends, visit the smallcase stocks collection today!
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Overview of the Top 10 Halal Stocks in 2024
Here are brief overviews of the companies on our halal stock list:
Reliance Industries Ltd
Founded in 1973 by Dhirubhai Ambani, Reliance Industries Ltd is one of India’s largest conglomerates with interests spanning oil refining, petrochemicals, retail, telecommunications, and media. It is a leading player in the Oil & Gas refining and marketing sector. The company operates the world’s largest refining complex in Jamnagar, Gujarat, and has diversified into numerous sectors over the decades.
As of now, Reliance Industries has a market capitalisation of Rs. 20,27,950.54 cr. The stock’s close price stands at Rs. 2,996.25, with a PE ratio of 29.13. The company has achieved a 5-year CAGR of 21.49%.
Tata Consultancy Services Ltd (TCS)
Established in 1968, Tata Consultancy Services Ltd (TCS) is a global leader in IT services, consulting, and business solutions. It is a part of the Tata Group, India’s largest multinational business group. TCS offers a wide range of services, including software development, digital transformation, and consulting, to clients worldwide.
TCS has a market capitalisation of Rs. 16,46,772.53 cr., with a close price of Rs. 4,502.00. The stock’s PE ratio is 35.87, and it has a 5-year CAGR of 15.23%.
Infosys Ltd
Founded in 1981 by N.R. Narayana Murthy and his six colleagues, Infosys Ltd is a pioneer in the Indian IT services and consulting sector. The company offers a variety of services, including software development, maintenance, and independent validation, to companies in banking, finance, insurance, and other sectors.
Infosys has a market capitalisation of Rs. 7,75,647.70 cr., and its stock closes at Rs. 1,880.25. The company has a PE ratio of 29.57 and a 5-year CAGR of 18.77%.
Hindustan Unilever Ltd
Hindustan Unilever Ltd (HUL) was established in 1933 as Lever Brothers India Limited. It is one of India’s largest Fast-Moving Consumer Goods (FMCG) companies, with a portfolio that includes household products, foods, beverages, and personal care items. HUL operates under the umbrella of the British-Dutch multinational Unilever.
The market capitalisation of Hindustan Unilever Ltd is Rs. 6,55,817.91 cr. The stock’s close price is Rs. 2,792.80, with a PE ratio of 63.81. The company has a 5-year CAGR of 8.33%.
HCL Technologies Ltd
HCL Technologies Ltd, founded in 1976 by Shiv Nadar, is a leading global IT services company. It provides a range of services, including IT consulting, enterprise transformation, remote infrastructure management, and engineering and R&D services. HCL is recognised for its innovation and customer-centric approach.
HCL Technologies has a market capitalisation of Rs. 4,53,886.20 cr., and its stock closes at Rs. 1,676.15. The company has a PE ratio of 28.91 and a 5-year CAGR of 25.45%.
Sun Pharmaceutical Industries Ltd
Sun Pharmaceutical Industries Ltd was founded in 1983 by Dilip Shanghvi. It is one of the largest pharmaceutical companies in India, with a strong presence in the generics and speciality medicines segments. The company’s products are sold in over 100 countries across the globe.
The market capitalisation of Sun Pharmaceutical Industries is Rs. 4,23,398.65 cr., and the stock closes at Rs. 1,750.65. The company’s PE ratio stands at 44.21, with a 5-year CAGR of 33.39%.
Maruti Suzuki India Ltd
Maruti Suzuki India Ltd was established in 1981 as a joint venture between the Government of India and Suzuki Motor Corporation, Japan. It is the largest automobile manufacturer in India and is known for its wide range of vehicles, including hatchbacks, sedans, and SUVs.
The market capitalisation of Maruti Suzuki India Ltd is Rs. 3,84,229.81 cr., with a close price of Rs. 12,276.35. The stock has a PE ratio of 28.49 and a 5-year CAGR of 14.61%.
Adani Enterprises Ltd
Founded in 1988 by Gautam Adani, Adani Enterprises Ltd is the flagship company of the Adani Group. It operates in various sectors, including commodities trading, coal mining, power generation, and infrastructure. The company is known for its diverse business operations and rapid growth.
Adani Enterprises has a market capitalisation of Rs. 3,55,190.15 cr., with a close price of Rs. 3,099.05. The stock’s PE ratio is 109.64, and it has a 5-year CAGR of 89.48%.
UltraTech Cement Ltd
UltraTech Cement Ltd, a part of the Aditya Birla Group, was founded in 1983. It is the largest manufacturer of grey cement, ready mix concrete (RMC), and white cement in India. The company is a leading player in the cement industry and has a strong presence across the country.
UltraTech Cement Ltd has a market capitalisation of Rs. 3,22,809.49 cr., and the stock closes at Rs. 11,309.40. The company has a PE ratio of 46.08 and a 5-year CAGR of 24.13%.
Titan Company Ltd
Titan Company Ltd was established in 1984 as a joint venture between the Tata Group and the Tamil Nadu Industrial Development Corporation (TIDCO). It is one of India’s leading consumer companies, best known for its brands in watches, jewellery, and eyewear. Titan’s flagship brand, Tanishq, is a major player in the jewellery segment.
Titan Company Ltd has a market capitalisation of Rs. 3,15,829.40 cr., and the stock’s close price is Rs. 3,604.40. The company has a PE ratio of 90.34 and a 5-year CAGR of 27.69%.
Confused about which Halal Stocks to pick? Check out these Shariah Compliant smallcases
Here is a Shariah-compliant smallcase that Halal Stock investors might be interested in:
Elystar AI Shariah Alpha smallcase: Elystar AI Shariah Alpha portfolio offers a measured way to aim for alpha over Nifty 50 Shariah Index while keeping the risk controlled. This is a long-term-oriented portfolio. The portfolio includes Nifty 50 Shariah Index stocks and other Shariah-compliant mutual fund holdings. For details on the Shariah Screening Process of the Nifty 50 Shariah Index, refer to page 58 in NSE’s Methodology document. As of July 21, 2023, the market capitalisation of these companies ranged from approximately INR 47,000 Cr. to INR 13,00,000 cr.
However, if you’re confused about which stocks to pick, you can explore smallcases:
- smallcases are readymade portfolios of stocks/ETFs, that are based on a theme idea or strategy
- They’re created and managed by SEBI-registered experts
- smallcase.com offers over 200+ stock portfolios, created by 180+ managers
- Some of the popular smallcases among new investors are as follows:
Disclosures for aforementioned smallcases
Disclosures for the Elystar AI Shariah Alpha smallcase.
What are Halal Stocks?
For many Muslim and non-Muslim investors, the appeal of halal company lies in their adherence to Sharia principles. These stocks are sourced from companies that practice ethical profit-sharing, avoid interest, and steer clear of prohibited activities and industries. Halal investing is not just about financial gain; it’s about social responsibility. It aligns with Sharia rules, promoting a balance between societal and individual interests and inspiring a sense of purpose in your halal investment in India.
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:
- Institutions dealing with interest and excessive debt
- Alcohol production and distribution
- Pork-related products and non-halal food processing
- Gambling
- Adult entertainment
- Tobacco
- Marijuana
- Cloning
- Firearms and defence
What Makes a Stock Halal?
Islamic scholars have devised a process akin to ethical funds’ negative screening, employing ESG criteria to assess business activities against Shariah principles. A Sharia-compliant fund typically includes an advisory board of Islamic scholars ensuring adherence to AAOIFI rules. Each fund operates based on the beliefs and interpretations of its Shariah Board.
The screening process entails:
- Business Activity Screening: This screening excludes companies involved in activities contrary to Shariah principles, such as interest-based transactions, alcohol, pork products, gambling, adult entertainment, tobacco, marijuana, cloning, firearms, and defence.
- Financial Ratio Screening: This process reviews companies based on their financial ratios. Acceptable criteria include interest-bearing debt not exceeding 33% of total assets and interest-bearing securities/assets less than 30% of the trailing 36-month average market capitalisation.
Investors should scrutinise potential investments to ensure compliance. Notably, they should avoid companies deriving income from Shariah-non-compliant activities. If considering such investments, investors should verify that the income from these activities does not exceed 5% of the company’s gross revenue. If it does, there are options for mitigation, including donating a corresponding portion of profits to charity and publicly opposing such activities.
Moreover, companies failing to meet the stipulated criteria are deemed Shariah non-compliant. Investors, irrespective of their faith, often find these criteria useful due to the risk management aspect.
Why Invest in Halal Stocks?
Halal investing aligns with Islamic principles and dictates that investments comply with Sharia law. This involves adhering to profit and loss sharing guidelines, avoiding interest (riba), and refraining from investing in prohibited sectors. Evaluating a company’s business activities and financial statements is crucial to determining its permissibility for halal investment.
Islamic scholars provide guidance on what constitutes halal investments, considering factors like a company’s revenue sources and adherence to Islamic law. Universally unacceptable investments include those involved in alcohol, gambling, interest-based financial services, pork products, pornography, and tobacco.
Determining a company’s core revenue sources is essential; investing may be prohibited if a business activity exceeds certain thresholds. In cases where avoiding haram activities entirely is impossible, adhering to specific screening criteria is necessary. However, any earnings from haram sources must be purified by donating them to a charity anonymously and without seeking personal benefit or recognition.
How to Invest in Halal Stocks?
Avoiding businesses involved in non-compliant activities is crucial to ensuring Sharia compliance in investment decisions. Beyond industry screening, investors should assess a company’s operational ethics and fairness.
A common error is investing in halal investment options in India with interest-based income, which contradicts Sharia principles. To gauge viability, ensure income from such activities doesn’t surpass 5% of the company’s total revenue. Two steps can mitigate this if it does: donating a matching percentage to charity and publicly opposing non-compliant activities.
Further screening involves financial ratio analysis. One key metric is the proportion of interest-bearing debt to total assets, which shouldn’t exceed 33%. This benchmark serves as a risk threshold for both Sharia and non-Muslim investors.
For a stock to be deemed halal, it must meet specific criteria:
- Interest-bearing securities and assets should be less than 30% of the trailing 36-month average market capitalisation.
- Interest-bearing debt should be less than 30% of the trailing 36-month average market capitalisation.
Exceeding these thresholds renders the investment non-compliant with Sharia principles.
How to Identify the Best Halal Stocks in India?
Investors can observe the following steps to identify the best halal stocks in India:
- Examine Core Business Activities: Ensure the company’s primary operations align with Shariah law, avoiding sectors like alcohol, gambling, pork, and conventional banking.
- Assess Financial Ratios: Scrutinize debt levels, interest income, and cash reserves to ensure compliance with Islamic financial principles. Total debt should not exceed 33% of market capitalisation, and interest-bearing income should be minimal.
- Review Governance and Ethics: Look for companies with strong governance and ethical standards, including adherence to environmental, social, and governance (ESG) criteria.
- Utilise Screening Tools and Indices: Use Shariah compliant screening tools and indices to identify Halal stocks. These tools provide predefined screening criteria for companies and indices listing Sharia-compliant stocks.
Who Should Invest in Halal Stocks?
Investors seeking Sharia-compliant investment options may find halal stocks to invest in that are suitable for their portfolio. These Shariah compliant stocks adhere to Islamic principles, such as avoiding investments in alcohol-related businesses, gambling, and other prohibited activities. Those interested in aligning their investments with their religious beliefs may consider exploring Halal stocks as a viable option.
Criteria for Not-Halal Stocks
Most Islamic scholars consider the following sectors impermissible or haram:
- Alcoholic beverage production and sales
- Tourism industries not adhering to Islamic principles
- Hospitality businesses like hotels and nightclubs do not align with Islamic guidelines
- Adult entertainment, including pornography
- Financial institutions practising interest-based lending (riba)
- Insurance companies not complying with Shariah guidelines
While these sectors are generally deemed non-compliant, others operate in a grey area. For example, a manufacturing firm may adhere to Islamic principles overall but engage in some non-compliant financial activities.
These companies, often termed “mixed companies,” pose a challenge for classification. To avoid unintentionally violating Islamic laws, many Muslims refrain from investing in them.
Key Features of Shariah Investments
Companies must adhere to Shariah principles, ensuring their primary operations comply with Islamic law. This means abstaining from involvement in activities such as gambling, alcohol, and tobacco, as dictated by Shariah law.
- 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.
Benefits of Investing in Halal Stocks
Investing in halal stocks brings numerous benefits, both financial and ethical:
- 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. The increasing availability of halal investment opportunities provides access to domestic and international halal markets.
- Financial Performance: Studies indicate halal stocks can deliver competitive returns, operate in resilient sectors, and minimise interest-bearing debt.
- Inclusivity: Shariah compliant 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 creating the first US mutual fund adhering to Islamic principles, leading 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 investors’ participation in profit and loss. Today, a vast list of halal mutual funds in India cater to Muslim investors, including the original Amana Income Fund (1986), Amana Growth Fund (1994), Amana Developing World Fund (2009), and Amana Participation Fund (2015), a Sukuk mutual fund. Amanie Advisors Sdn Bhd, an independent board of Sharia advisors, quarterly reviews all Amana Funds’ portfolios to ensure compliance with Islamic principles.
To Wrap It Up…
Determining the permissibility of stock investing in Islamic finance is a nuanced task, dependent on various factors such as the nature of the company’s operations, financial setup, and future strategies. It’s not a simple binary of halal or haram; instead, it demands a thorough comprehension to make an informed judgment.
The finance sector is witnessing a positive shift towards accommodating Islamic principles. Specialised platforms and investment products adhering to Shariah guidelines are emerging, underscoring this trend. These platforms often feature endorsements from scholars and offer educational materials, aiding investors of all levels in navigating the realm of halal investments.
Frequently Asked Questions About Halal Stocks
No, halal stocks aren’t exclusive to any investors. They align with ethical investing principles rooted in social justice and ethics. There’s a growing interest in ethical stocks worldwide.
To determine if a stock is halal, consider three main factors:
1. Business activity: Understand how the company generates revenue.
2. Financial activity: Assess the company’s interest payments, investments, cash reserves, and debts.
3. Ethical considerations: Evaluate if the company engages in morally or ethically questionable practices.
Different Shariah bodies may have varying criteria, primarily regarding financial activity screening.
There is an abundance of material on learning about halal stocks. You can consult blogs like this one or other sources like newsletters, social media, Muslim investor community forums, etc.
To comply with Shariah law, a company’s core operations must adhere to halal principles, excluding involvement in activities like gambling, alcohol, or tobacco. The ‘Debt to Equity ratio’ must not exceed 33%.
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