Abstract
The present study empirically examines the risk and return of the Nifty Shariah index and Nifty index during the period 2nd January 2007 to 31st December 2010. The sample period is further divided into bull market period and bear market period based on the movement of the both indices during the study period. The objective of the study is to analyse the performance of the Islamic index and common index and to test whether any significant difference between both indices in India. Based on the previous studies, the present paper employs Risk adjusted measurement such as Sharpe index, Treynor Index and Jensen alpha. The t- test is used to test the mean returns difference between both indices. The study found that Nifty Shariah has been underperformed during the sample and sub sample period. According to ttest, the mean difference between both indices has not been significant which reveals both are consistent. The risk adjusted returns for the both indices reveals that both were underperforming with respect to risk free rate of return. The study has also disclosed the low volatile nature of Nifty Shariah than Nifty index. Finally, the study concludes that Nifty Shariah and Nifty indices in India are performing in a similar manner.
Highlights
Over the last few years, the demand for Shariah compliant financial products has increased
Islamic investment obtained its significance in the developed and developing countries after 1990’s with the introduction of broad macroeconomic and structural reforms in financial system, the adoption of liberalization policies for trade, capital movements, privatization, and global integration of financial market, and intern they have paved the way for Muslim community to participate in the stock market operations
The stock market operations of the Muslim community are organized by Shariah Advisory Committee (Shariah Supervisory Board) of a country which creates and forms the rules and regulation for investment on the basis of Islamic law for the benefit of 1.5 billion Muslim populations among the 6.3 billion world population
Summary
Over the last few years, the demand for Shariah compliant financial products has increased. The stock market operations of the Muslim community are organized by Shariah Advisory Committee (Shariah Supervisory Board) of a country which creates and forms the rules and regulation for investment on the basis of Islamic law for the benefit of 1.5 billion Muslim populations among the 6.3 billion world population. Shariah Advisory Committee of the Country provides the guidelines, regulation and protects interest of the Muslim investors who wish to invest on the companies that adheres the Shariah principles. Each company’s audited annual report is reviewed to ensure that the company is not involved in any non-Shariah compliant activities. Those that are found to be non compliant are screened out.
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