Halal Stock's Shariah Screening Methodology
We conducts the screening according to AAOIFI rules and provides additional elaboration on the provided guidance.
Halal Stock is a beginning In sha Allah to a platform that connects us and our investments through our Islamic values. We are happy to launched a Shariah stock screener, alhamdulillah, which currently screens most of the Indian Stocks listed on NSE & BSE stocks exchange.
Screening of stocks at HalalStock.in is based on the Shariah standards adopted by some of world’s leading institutions and indices. The business or industry screen is based on what most major Shariah standards agree on.
Business Screening
We screen out companies in the following types of business.
The first aspect is covered under the “Sector and Activity Based Screening”, whereas the
second aspect is dealt with under the “Quantitative or Financial Screening”.
We make an exception for cannabis used solely for medical treatments and research. This exception is based on the fatawa of major scholars and boards around the world.
Alcohol
Gambling
Pork
Tobacco
Banking & Insurance
Movies, Music & Haraam entertainment
Recreational Cannabis*
Financial Screening
After removing companies with non-compliant business activities, the aftermath companies are further examined for compliance with accounting ratios, as certain ratios may violate the compliance measurements.
Cash Compliance:
For a company to pass the Cash compliance ratio its total cash and liquid deposits over its 3 years average market capital should be less than 33%.
Debt Compliance:
For a company to pass the Debt compliance ratio the total interest bearing debt over its 3 years average market capital should be less than 33%.
Receivable Compliance:
For a company to pass the Receivable compliance ratio its total business receivables over its 3 years average market capital should be less than 49%.
FAQ
Compliant Stock turned to Non-Compliant.
Compliant Stock turned to Non-Compliant : If you invest in a Shariah compliant stock and it turns non-compliant, you have 90 days to sell that stock. It turns compliant, then you are as good as you were. If it does not turn compliant, then you must exit the stock at the end of the 90 days. All capital gains and dividends received from 90th day till sold date must be donated (purified). If you are in a loss, there is no purification required as you did not earn anything.
Non-Compliant Stock turned to Compliant: If a stock you invested in was compliant at the time of investment, but subsequently turns non-compliant, you will have 90 days to exit that stock. This 90 day grace period is given to make the exit easier for the investor, accounting for adverse market conditions, next quarterly results and other conditions may exits. ALL gains, capital/trading/dividends can be retained as permissible income if the stock is sold within the 90 day grace period. ALL gains, capital/trading/dividends need to be fully purified i.e. 100% of such gain from the end of the 90th day till the date of sale needs to be purified (donated to charity). You may deduct any transaction charges such as brokerage paid, and other statutory taxes and the net amount needs to be donated.
Example:
Stock: ABC Company
Status at buy: Compliant
Status at Sell: Non – Compliant
Buy Price on 1st Jan: INR. 10
Turned non-compliant on 1st April: INR. 30
Grace period ends: 30th June (90 days from 1st April)
Price when Grace period ends: INR. 100 (30th June).
Scenario 1
Sell date: 30th June (before grace period ends)
Sell Price (on 30th June): INR. 100
Capital Gain : INR. 90 (100- 10)
Permissible income: INR. 90 (100-10) as the stock was sold before the expiry of grace period
Income to be purified: NIL
Scenario 2
Sell date: 1st July (after grace period ended)
Sell Price (on 1st July): INR. 150
Capital Gain: INR. 140 (150-10)
Permissible income: INR. 90 (100-10) i.e. gains made till end of grace period.
Income to be purified: INR. 50 (150-100) i.e. gains made after the end of the grace period
This amount (INR. 50) has to be given away to charity as it is non permissible income (except to mosques etc.)
You may deduct the transaction charges from INR. 50 such as brokerage paid, and other statutory taxes and the net amount needs to be donated.
Disclaimer
If the stock passes the Above criteria, it is marked as Shariah Compliant.
Halalstock. is just advice and is not a blanket Fatwa authority! — While we have taken the best efforts to mark stocks as Halal or Haram, the individual decides to invest based on the stocks list provided by HalalStock.in. The people behind HalalStock.in will not be liable in any way on the judgment day of Qayamat in the hereafter or this world. HalalStock.in assumes no responsibility or liability for your investment results. All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance.
If you ever doubt your investments and income activities, do always reach out to a trusted & reputed Aalim/Mufti of your particular Maslak for 100% assured advice.
No work is without error and we are always a work in progress. We welcome your feedback, questions, and criticisms. Jazaakumullahu khairan!
