Top 10 Halal Mutual Funds in India: Shariah-Compliant Funds List (2024)

Introduction

The number of Muslim investors in India is growing rapidly. Many want investments that follow Islamic rules. This has increased demand for Shariah-compliant mutual funds. These funds spell out a way to invest ethically while following faith. They differ from regular mutual funds by avoiding forbidden industries like alcohol, gambling, and pork. According to recent data, Islamic finance in India now manages over $10 billion. As the market grows, choosing the right halal mutual fund becomes more essential for investors seeking both faithfulness and good returns.

Understanding Halal Mutual Funds in India

What are Halal Mutual Funds?

Halal mutual funds are investment products that follow Islamic laws. They invest only in businesses that are not involved in haram activities, such as alcohol, tobacco, or arms. The key idea is to ensure the fund's assets are Shariah-compliant, meaning they meet Islamic ethical standards. These funds are governed by guidelines set by recognized Shariah boards. In India, the Securities and Exchange Board (SEBI) oversees mutual funds, including Islamic ones. These funds regularly check their holdings for compliance.

Benefits of Investing in Halal Mutual Funds

Choosing halal mutual funds can be an ethical move. They promote social responsibility and avoid industries harmful to society. Many investors like the idea of avoiding "haram" industries, which are forbidden in Islam. Halal funds also offer competitive returns, often comparable to conventional funds. Plus, aligning investments with personal faith adds peace of mind. It turns money into a tool that supports values and beliefs.

Challenges and Considerations

There are some hurdles in Islamic investing. Options remain fewer than regular funds. Ongoing compliance checks are crucial to stay within Islamic guidelines. Also, market ups and downs impact all funds, including halal ones. Navigating these challenges requires careful research and expert advice. Still, many see the benefits outweigh the difficulties, especially with regulated, certified funds.

Criteria for Selecting Top Halal Mutual Funds in India

Shariah Compliance Certification

The first step is to verify certification by known Shariah boards. Reputable certifiers check fund holdings regularly. This ensures the fund remains within Islamic law. Investors should look for updated compliance reports to confirm ongoing adherence.

Fund Performance and Track Record

Review past returns to assess a fund’s performance. Compare these with benchmark indices like the Nifty or Sensex. A good halal fund should show consistent results over several years. Risk-adjusted performance helps evaluate how well the fund manages volatile markets.

Fund Management and Transparency

Experience counts when it comes to fund managers. Look for managers who specialize in Islamic finance. Transparency matters too. Clear information about portfolio holdings and compliance reports builds trust and confidence.

Portfolio Composition

Check what assets are included in the fund. Prefer funds that avoid industries like alcohol, gambling, or pork. Look for diversity across sectors and companies. Proper diversification can lower risks and improve long-term stability.

Top 10 Halal Mutual Funds in India for 2024

1. ICICI Prudential Shariah Mutual Fund

This fund prioritizes Shariah compliance with a focus on growth. It invests mainly in Indian equities aligned with Islamic principles. Its track record shows steady returns over the years. The fund's sector allocation favors banking, IT, and pharma, with minimal exposure to haram industries.

2. Axis Islamic Funds – Axis Islamic Equity Fund

Known for its strict compliance and good management, this fund aims for long-term capital growth. It screens each stock carefully and has a diversified portfolio. Top holdings include select banks and tech firms embracing Islamic ethics.

3. HDFC Shariah Equity Fund

HDFC’s Islamic fund balances growth with stability. Its investment approach emphasizes stocks with strong fundamentals and compliance. The fund has delivered consistent returns and focuses on sectors like healthcare and technology.

4. Kotak Shariah Equity Fund

This fund invests across multiple sectors, avoiding haram industries. It emphasizes value investing and portfolio diversification. Recent performance highlights steady growth, making it suitable for conservative investors.

5. SBI Shariah Mutual Fund

A well-recognized fund with certified compliance, SBI’s Islamic fund invests in stocks with strong ethical backing. Sector focus includes banking, IT, and consumer goods. Its risk management strategies aim to protect investor capital.

6. Nippon India Shariah Equity Fund

Nippon’s Islamic offering aims for balanced growth by following strict Shariah screens. It invests primarily in Indian stocks that meet Islamic standards. Past data shows a positive growth trend over the last few years.

7. Edelweiss Islamic International Fund

Focusing on global Islamic markets, this fund offers diversification beyond India. Its investment approach relies on Shariah-compliant assets worldwide. It appeals to investors looking for international exposure and faith-based investing.

8. Franklin India Islamic Fund

This fund blends ethical investing with market growth potential. It invests in companies that follow Islamic principles and emphasizes sector diversity. Its performance has been reliable over a five-year span.

9. Tata Ethical Fund (with Islamic fold)

Although primarily ethical, Tata’s fund includes Islamic considerations in its selection process. It avoids haram industries and favors socially responsible companies. The fund has shown steady returns and aligns with ethical and faith-based investing.

10. UTI Shariah Fund

UTI’s Islamic fund balances sector exposure and risk. It emphasizes compliance and transparency at every step. Historically, it has provided consistent returns aligned with Islamic standards.

How to Invest in Halal Mutual Funds in India

Step-by-step Investment Process

Start by researching to find the right halal mutual fund matching your goals. Complete the KYC process with necessary documents like ID proof and address verification. After that, open an investment account and choose your preferred mode—online or offline. You can start with small amounts and gradually increase your investment.

Tips for Islamic Investors

Diversify across sectors within halal limits. Regularly review fund performance and compliance documents. Seek guidance from Islamic financial advisors to ensure your investments stay aligned with your faith. Remember, investing is a long-term journey, so patience and regular checks pay off.

Conclusion

Choosing the right halal mutual fund is a vital step for faith-driven investors. By verifying compliance and reviewing performance, you can ensure your money works ethically and effectively. 2024 holds expanding opportunities for Islamic investing in India. Stay informed, seek expert advice, and make your investments count—with faith and confidence. The future of Shariah-compliant mutual funds looks promising, offering both spiritual fulfillment and financial growth.