Tata Group’s investment unit is seeking to attract about $100 million within three years to India’s first Shariah-compliant fund aimed at global investors, targeting equities in a country that lacks regulations for establishing an Islamic debt market.
The Tata Indian Shariah Equity Fund has $3 million after being set up in June to tap investment mainly from the West Asia, said Mumbai-based Tata Asset Management, which oversees $5 billion in stocks and bonds, on Tuesday.
India has no Islamic finance policies, restricting sales of Shariah-compliant bonds in a nation with 157 million Muslims, according to Paris-based BNP Paribas SA and Standard Chartered. The nation’s benchmark Sensex stock index rallied 16.5% this year, compared with a 13.6% advance for MSCI’s emerging-market share index. Overseas investment in Indian equities climbed 86% this year to a record $26.1 billion as of November 1.
“India remains a great story for most institutional investors globally,” Rohit Chawdhry, who helps manage $350 million of assets at Bahrain Islamic Bank, the Persian Gulf country’s second-largest Shariah-compliant lender, said on Monday. “An Indian sukuk would likely see a blow-out response if there is one, given that there is almost nothing in terms of external sovereign issuance from India.”
A 13-member panel of experts headed by Raghuram Rajan, a finance professor at the University of Chicago and former chief economist at the International Monetary Fund, recommended in April 2008 that India introduce banking that complies with the religion’s ban on interest to attract capital.
Prime Minister Manmohan Singh said last week during an official visit to Kuala Lumpur that he would ask the central bank to learn more about Islamic finance from Malaysia, the world’s biggest market for sukuk. “There have been, from time to time, demands that we should experiment with Islamic banking,” he said.
RBI will conduct a study when the need arises, deputy governor Subir Gokarn told reporters in Mumbai on Tuesday.
Kerala’s plan to set up an Islamic investment company to sell India’s first sukuk was blocked by a state court in January after a petition was filed against it by Subramanian Swamy, whose Janata Party opposes the national Congress Party-led government. The Kerala high court heard arguments from Swamy, a former member of the national parliament, against the plan on Tuesday.