The Definitive Guide to Halal Investing in India
November 2025
As the Managing Partner of Zamzam Capital and someone with over 25 years’ experience in Islamic banking, finance & investments, I’ve witnessed tremendous growth in both awareness and accessibility for Shariah-compliant investing in India. Currently, one finds both a great promise but also unnecessary confusion around what Halal investing really means. This guide is designed as a practical resource for anyone—Muslim professionals, entrepreneurs, housewives, students or NRIs—looking to grow their wealth without compromising on religious values.
What is Halal Investing?
Halal investing simply means ensuring that your investments comply with the principles of Shariah—Islamic law that governs all areas of life, not just acts of worship, but also how we earn, spend, and invest. In Islam, the default rule is that everything is permissible except what is explicitly forbidden.
When it comes to investing, the critical requirement is to avoid what’s Haram, especially riba (interest), gharar (excessive uncertainty), and maysir (gambling). Any business or financial product that contains these elements is not permissible.
Thus, for an investment to be Halal, it must satisfy three key principles listed below:
1. The business itself must be Halal
The company or venture you invest in should operate in a permissible (Halal) sector. Businesses involved in alcohol, gambling, conventional banking, insurance, pornography, entertainment and weapons are prohibited (weapons are prohibited for ethical reasons due to the current nature of war, where even innocent women and children suffer due to collateral damage).
Scholars allow up to 5% of a company’s income to come from non-Halal sources, provided it is purified through charity.
2. The investment should not offer a fixed or guaranteed return
Any return linked to a pre-determined interest rate or the fixing of a profit is considered as riba and is therefore forbidden. The Shariah encourages risk-sharing — meaning investors should share in both profit and loss rather than earn a fixed yield regardless of the success of the underlying investment.
3. The principal amount cannot be guaranteed
Guaranteeing capital, regardless of business performance, goes against the spirit of risk-sharing. If an investment promises no risk to your principal, it violates Shariah norms.
Additionally, speculative contracts such as futures and options are not permissible because they are based on uncertainty, resembling gambling rather than genuine trade. Similarly, conventional insurance products are also considered non-compliant because they involve excessive uncertainty (gharar) and riba as well.
Main Halal Investment Options in India
For Muslims in India and NRIs seeking Shariah-compliant investments, the primary asset classes are real estate, gold/silver, and the stock market. Other opportunities include investing directly in private businesses or projects that fully comply with Shariah norms.
1. Real Estate
Real estate remains one of the simplest and safest Halal investments. Whether it’s buying property for rental income or long-term capital appreciation, it avoids interest-based returns and speculative instruments.
Investors are advised to deal locally — purchasing land or apartments in their own city or state — to maintain transparency and control.
Some real estate crowdfunding platforms like PropertyShare and Strata may also be Shariah-compliant, though they should be examined carefully on a case-by-case basis.
2. Gold & Silver
Gold and silver have historically been trusted Islamic investment vehicles. However, physical ownership is crucial for Shariah compliance.
Physical bars or coins are preferred over jewelry, as jewelry includes making charges that distort the investment value and resultant ROI. Digital gold schemes, gold instalment plans, and ETFs — though popular — are not Shariah-compliant for several reasons:
- Most digital gold platforms in India, such as those offered by SafeGold, DigiGold or MMTC-PAMP, do not ensure that the specific piece of gold you purchase is the same one that is delivered later when delivery is taken.
- Gold instalment plans often offer “free” instalments or waive off making charges, which amounts to interest income.
- Gold ETFs and e-gold instruments involve indirect ownership and are currently not certified by any Shariah boards.
The safest Halal route remains physical gold or silver, securely stored in a bank locker or vault.
3. Stock Market
The Indian stock market is the fourth-largest globally by market capitalization, offering vast potential for Halal investors. Shariah-compliant stock investing can be done in two ways:
(a) Through Mutual Funds
Currently, India has three Shariah-compliant mutual funds:
- Tata Ethical Fund
- Taurus Ethical Fund
- Quantum Ethical Fund
These are certified by recognized Shariah screening firms and are suitable for long-term investors.
(b) Direct Investment in Stocks
Investors can directly buy shares of companies listed in Shariah-compliant indices or certified Halal stock lists, such as those provided by Zamzam Capital, TASIS, Musaffa and Islamicly.
Each organization uses slightly different screening ratios, but the general rules remain the same:
- The company’s core business must be Halal.
- Debt-to-asset ratio should not exceed 33% (some scholars use 25%).
- Impure income should not exceed 5%.
- Receivables and cash should not dominate the balance sheet, with Fixed Assets being at least 20% of Total Assets.
Zamzam Capital follows a detailed three-step screening process:
- Business screening (Halal sector verification).
- Financial screening (five key financial ratios are used).
- Qualitative Research screening (examining financial reports, investor presentations & con-calls for deeper Shariah-compliance violations).
For example, firms like Infosys and Wipro, despite passing the Business & Financial screening filters, are excluded from Zamzam Capital’s Halal Stocks List because a significant portion of their income (>5%) comes from conventional banking and insurance (BFSI sector) clients — activities that directly facilitate riba and are therefore impermissible.
4. Private Equity and Other Assets
Investing in private, unlisted businesses is permissible if the company is entirely Halal, both operationally and financially. Unlike listed companies, there are no tolerance thresholds (like 5% or 33%) here; such businesses must be 100% interest-free.
Other Shariah-compliant asset categories include Shariah-compliant art (without depictions of living beings) and ethical collectables. However, these remain niche and illiquid.
Why is Muslim Participation So Low in India’s Stock Market?
Despite the Indian stock market’s massive growth, Muslim participation remains minimal. This is due to two primary reasons:
- Low financial inclusion overall:
Before COVID-19, only 3–4% of Indians invested in the stock market; even today, it’s around 10%. Among Muslims, the number is far lower, as multiple studies — including the Sachar Committee Report — highlight that Muslims are the most financially excluded community in India. - Lack of awareness and access to Halal products:
Until recently, very few regulated entities provided Shariah-compliant investment guidance or products. Many Muslims avoided investing out of fear of violating Shariah, but this is now changing with the emergence of SEBI (Securities and Exchange Board of India)-certified advisors, Shariah-compliant mutual funds and portfolios such as smallcases offered by Zamzam Capital.
Encouragingly, awareness of Islamic finance & investments is growing, with more Muslims seeking financial literacy and ethical wealth-building strategies.
Are Mutual Funds Truly Halal?
The three Shariah-compliant mutual funds currently available in the market are genuinely screened for compliance, but their impact has been modest due to their small asset size and lackluster marketing—a surprising number of investors are actually non-Muslims who are drawn by ethical restrictions of such funds!
Their returns match the indices because they’re highly diversified with over 50+ stocks, not allowing for over performance; smaller, focused portfolios like Shariah-compliant smallcases can potentially outperform with lower costs if chosen wisely. But as with all investing, knowledge and discipline matter the most.
What We Do at Zamzam Capital
At Zamzam Capital, our mission is to empower ethical growth by connecting investors with Shariah-compliant opportunities that are tangible and create real-world impact.
● Zamzam Capital provides a complementary Halal Stocks List that is updated every six months as a service to the community.
● The firm is a SEBI-registered Research Analyst (Registration No: INH000016199) offering two types of products:
§ Trading Products: Short-term stock calls and recommendations, including the “Momentum Plan” (focused on mid and small-cap stocks showing momentum) and the “Nifty 200 Plan” (focused on large-cap stocks showing momentum) that can be subscribed through its website or through the Zamzam Capital App (currently available only on Android).
§ Investment Products: Customized and theme-based stock portfolios known as “smallcases” that are considered an alternative to mutual funds where customers can invest through their own demat accounts. Currently, Zamzam Capital offers three such smallcases that can be subscribed through its website or the smallcase App.
● We additionally offer complementary advice on Shariah-compliant trading, investments, savings & finance options available in India to both locals and NRIs through various social media platforms, including YouTube, Instagram, Telegram & LinkedIn.
Practical Advice for Investors
- Start early. Save steadily. Build your habits first—shun overspending and borrow wisely, if at all.
- Diversify your Halal assets portfolio:
- Consider putting 10–20% in gold, 40–50% in stocks, and the rest in real estate.
- Avoid high-risk speculation and never invest in instruments or platforms you don’t fully understand or which are un-registered by SEBI.
- Don’t chase returns at the cost of Shariah compliance. Learn from the disastrous consequences of the “Halal” Ponzi schemes such as Heera Gold, IMA, Ambidant, etc.
I often hear: “I’d rather have average returns that are 100% Halal than risk even 1% Haram and have no barakah in my earnings.”
- If in doubt, seek advice from a SEBI-registered expert or a Chartered Accountant (CA).
- Don’t hesitate to leverage regulated research or guidance—you wouldn’t self-medicate, so why try to self-invest without the right expertise?
Resources and Next Steps
For further guidance and to stay informed, visit our website & connect with us directly on LinkedIn, Telegram, WhatsApp or Instagram.
By: Saif Ahmed
Managing Partner, Zamzam Capital
Note: Original Article can be found here: https://barakahinsider.com/the-definitive-guide-to-halal-investing-in-india/
