Are you eco-friendly or a staunch believer in Islamic laws and look to mirror these beliefs in your stock portfolio? There’s good news for you. The stock exchanges now have indices catering specifically to your investment philosophies. The Bombay Stock Exchange (BSE) launched Greenex, or Green Index, which will calibrate the performances of companies in terms of carbon emissions. The choice of firms is made on the basis of their greenhouse emissions in the last four financial years.
This is the second such thematic index to be launched by the BSE. In late 2010, it launched the BSE Shariah Index. Shariah, the religious law of Muslims, has strictures relating to finance and commerce — to be abided by the faithful. Arab investors invest in 'clean' stocks only. The National Stock Exchange (NSE), too, has its Shariah index — S&P CNX Nifty Shariah.
“You could use these indices to measure the performance of the scrips (with the index acting as a barometer),” says Ashish Kumar Chauhan, deputy CEO, BSE.
The indices shun companies that disregard their 'faith'.
| THEME PLAYS | ||
| Index | 1-month return (%) | 1-year return (%) |
| Sensex | 2.88 | -0.52 |
| BSE Greenex | 3.06 | 0.17 |
| BSE TASIS Shariah 50 | 3.20 | 5.27 |
| MSCI World Islamic Index | 3.49 | -2.96 |
| MSCI USA Catholic Values Index | 3.92 | 4.08 |
| S&P Global Luxury Index | 6.27 | 12.24 |
| S&P Global Water Index | 4.16 | -0.06 |
| FTSE4 Global Good Index | 4.55 | -5.49 |
| Complied by BS Research Bureau | ||
Internationally, there are many such indices built on various themes. Examples include S&P's Global Luxury and Global Water Index and FTSE's Good Index. There are a number of thematic and strategic indices on the Dow Jones. The MSCI, too, has theme-based indices.
These, however, can serve only as reference points for picking stocks and deciding their weight in your portfolio. Trading can't be done on these indices. "The average retail investor will not know the day-to-day workings of firms. These indices can be used to replicate a portfolio accordingly. You will get the allocation and the performance of the particular scrips in the index. Accordingly, you can build your portfolio," says Shanu Goyal, senior research analyst, Bonanza Portfolio.
These indices invest across sectors, providing you with ample diversification.
Take a look at the BSE's Shariah Index — it has 50 stocks of companies that do not deal in alcohol, conventional financial services (banking and insurance), entertainment (cinemas and hotels), tobacco, pork, defence and weapons. TCS is the biggest stock in the index, with 8.26 per cent allocation (ONGC, RIL, Bharti Airtel and HUL follow). The index has risen 3.13 per cent in one month and 5.2 per cent in a year. In contrast, the Sensex was up 2.89 per cent in the last month and down slightly by 0.51 per cent in a year.
The Greenex comprises 20 stocks having minimum carbon footprint, market capitalisation and turnover. It assesses the energy-efficiency of firms. Bhel is the weightiest scrip in the index, followed by Sun Pharma, Tata Motors, NTPC and HUL. The Greenex has risen 3.13 per cent in one month and 0.24 per cent in a year, according to data on the BSE.
These returns, however, cannot be viewed as indicative at the moment, as one cannot trade in the index. The market for such indices would be very niche, say experts. "When a mutual fund house launches a scheme tracking these indices, you could 'ethically' invest in them," says Suresh Sadagopan, certified financial planner, Ladder7 Financial Advisories.
As for now, he says, make do with the list of scrips on these indices. Just because a company is Shariah-compliant or 'green', doesn't mean you have to invest in them. Retail investors have to be extra-vigilant when it comes to investing directly in stocks. Do the usual background check for investments — such as looking at the fundamentals of the company, its valuations, and the stock price performance.
