Best Halal Mutual Funds in India

Due to the rise in “Mutual Fund Sahi Hai” campaign in India, people has shown lot of interest in investing their money in Mutual Funds. Which has made it easy for people to invest. However, on the other side, it is very difficult for Muslims to find the Best Halal Mutual Funds in India.

I’ve made list of the Best and the only available Halal Mutual Fund options for Muslims in India. I’d recommend you to read this complete article as its the complete guide with suggestion for best fund.

Let us first understand what a halal fund is, in complete details.

S&P BSE 500 Shariah Index for Indian stock market index was established on 27 December 2010 on Bombay Stock Exchange, in collaboration with the Taqwaa Advisory and Shariah Investment Solutions (TASIS).

This index only includes those companies which are allowed in Islam. It excludes industries such as banking, alcohol, gambling, cigarette, etc and also those companies which has higher debt to equity (means companies that have taken lot of loan).

So the Asset Management Company (or the Mutual Fund Company) has to select companies only from this index to create a portfolio for their Halal Fund. Hence they have limited options to play with but its ethical for Muslims.

Lets have a look at the list of Halal Mutual Funds in India

  1. Tata Ethical Fund Plan
  2. Taurus Ethical Fund Plan
  3. Reliance ETF Shariah BeES

That’s all we have as of now. I know the list is small considering that we have 14% Muslims in India, lets hope the number of ethical funds increase in future.

  • Tata Ethical Fund Plan.

Managed by a reputed brand of Tata Mutual Fund company. It has almost 50% of investment in largecap, 35% in midcap and rest in small cap companies.

You can invest a minimum of Rs.5000 as one time (lumpsum) or SIP for Rs.500.

In the last 5 years, the returns of this Fund has been a little less then the benchmark/Index as you can see below . Also the expense ratio for the direct plan is 1.48% which is slightly on the higher side. If you invest Rs.1000 for 1 year then they’ll simply charge you Rs.14.8 but this charge is applied on pro rata basis everyday and deducted from your principal investment amount.

  • Taurus Ethical Fund Plan

Managed by a Taurus Mutual Fund company and has almost 51% of investment in largecap, 28% in midcap and rest in small cap.

You can do a minimum investment for Rs.5000 as lumpsum or Rs.500 as SIP(monthly investment).

The returns of this fund has been better than the index and also than the Tata Ethical Fund since the day this fund started as you can see below. However, the expense ratio is very high which is 2.03% currently for direct plan.

  • Reliance ETF Shariah BeES

This fund has almost 99% investment in largecap companies.

Its an ETF fund which means you need to have a demat & trading account with a share brokerage company to invest in this fund. However, the expense ratio is only 1.16% currently which is almost half of the other two funds.

On the other hand, you pay an annual fee to your broking company so you need to calculate the fee yourself as the annual maintenance fee for demat & trading account is different for all the broking companies. If you already have a share market account and you invest in stocks then go for this.

The return of this fund is below par and has never got more than 10% CAGR in the last 10 period.

Final verdict: If you’re starting out as a new investor then I’d suggest to start an SIP with either Taurus or Tata ethical fund and ensure its DIRECT plan as opening a trading account will be a lot of hassle. We always recommend investing for long term so you’ll be investing for 5-10 years and save in your annual trading account fee.