Are there any mutual funds compliant with Sharia law?

There are three Sharia compliant mutual funds in India:

• Goldman Sachs CNX Nifty Shariah BeES Fund
• Taurus Ethical Fund
• Tata Ethical Fund

Out of the three Tata Ethical Fund is the best to invest in.

Tata ethical fund is an open ended equity fund that invests in a diversified equity portfolio based on principles of Sharia. The investment objective of the fund is to provide medium to long term capital gains by investing in Sharia compliant equity and equity related instruments.

The Sharia law in financial system is based on the principles that no interest will be charged on deposits, as it is prohibited under Islam. In India the RBI has not taken any step for introduction of Sharia-compliant mutual funds.

Mutual fund compliant with Sharia law:

• An open-ended equity fund
• Investment will be in a diversified equity portfolio based on principles of Shariah
• Investments will be in well-researched value and growth oriented companies from Shariah compliant sectors.
• Investments in companies involved in activities like alcoholic beverages, gaming/casinos, non-halal food products and conventional financial institutional based on interest is avoided. Companies with higher debt to equity ratios are also avoided
• Investment is done mainly in low leverage companies
• Purification of any prohibited income on yearly basis as advised by Shariah advisor

Options are few in the market when it comes to such mutual fund. Here’s some:

1. Tata Ethical Fund - Regular 
2. Taurus Ethical Fund - Regular

The Sharia-compliant financial system is based on the principles of not charging an interest on deposits, as it is prohibited under Islam. It is also known as Islamic compliant financial system. The Reserve Bank of India has not taken any step for introduction of Sharia-compliant mutual funds in India.

A mutual fund compliant with Sharia law is an open-ended equity fund which invests in a diversified equity portfolio based on principles of Shariah. The investment objective of the scheme is to provide medium to long-term capital gains by investing in Shariah compliant equity and equity-related instruments of well-researched value and growth-oriented companies.

Key Attributes of Sharia complaint mutual funds:

• Investments in well-researched value and growth oriented companies from Shariah compliant sectors.
• Avoids investments in companies involved in activities like alcoholic beverages, gaming/casinos, non-halal food products and conventional financial institutional based on interest.
• Avoids companies with higher debt to equity ratios and thereby invests in low leverage companies
• Purification of any prohibited income on yearly basis as advised by Shariah advisor
• Very few options are available in market for this kind of mutual fund. Here’s some:

1. Tata Ethical Fund - Regular 
2. Taurus Ethical Fund - Regular

Happy Investing!

Yes there are few Mutual Funds that are compliant with Sharia law. 

Definition from web: 

Sharia (other variations Shariah, Shari'ah) is the Muslim or Islamic law which regulates many aspects of a Muslim's life including the type of investments allowed. For instance, interests are considered usury according to the Riba rule therefore bonds are prohibited to investors following the Sharia law.

Tata Ethical Fund is one such fund where the investments are made in the companies whose earnings are predominantly through business activity and not interest on investments. Therefore it is aligned with the Sharia Law. The fund AUM is ~500 cr and it has given 16.5% year-on-year returns in last 5 years. 

Other fund is - Taurus Ethical Fund. 

My pick would be Tata Ethical Fund.