Shariah Guidelines for Trading and Investment in Stocks
The Answer is‘YES’
It is permissible for Muslims to invest in stock markets if the company’s Shares are in accordance withShariah principles.
Trading in shares on the stock market is absolutely fine from an Islamic view point.
Unfortunately, that there is a common perception among Muslims that purchase and sale of shares in the capital market is akin to gambling and hence Islam prohibits it – This is not true!
It is worth mentioning that participation in the capital markets will not only improve the economic status of Muslims but it will also give them an opportunity to become a part of the development of the economy for the country.
Is Investment in all companies on the Stock Market permissible?
NO
Only those companies which are Shariah compliant can be invested in. Shariah compliance of companies listed on the stock market is dynamic and hence you need to keep a watch if a company is Shariah compliant at all times.
Which Companies listed on the Stock market are Shariah compliant?
Shariah Scholars have set few norms for Halal Investments in Shares of companies listed on the Stock Market.
The stocks of companies which are involved in prohibited activities like Conventional financial services, Insurance business activities, Stock broking business in general, sales of alcohol, pork, tobacco, gambling, casinos, betting, prohibited pictorial advertisem*nts and entertainment based on music, movies and the likes are not allowed to be invested in by Muslims.
Stocks which derive revenue in excess of 95% of its total revenue from any activity other than the ones mentioned above are generally fine.
Such stocks are HALAL for investments with further application of accounting and financial ratios which will be elaborated below in accounting based checks.
Accounting & financial Ratio Screening:
Once the company is found to be not involved in any prohibited activity, it has to be examined on financial activities whether they are under the permissible threshold percentage as decided by Shariah scholars:
1. Debt / Market Value of Equity (36 Month average) < 33 %
2. Accounts Receivables / Market value of Equity (36 month average) < 49 %
3. (Cash + Interest Bearing Securities) / Market value of Equity (36 month average) < 33%
4. If a Company passes the above norms, a Muslim can buy shares of such Companies.
For more information regarding the shariah screening criteria, please readShariah Screening Norms
How do I keep track if a company is Shariah Compliant?
Easy answer – use theIslamicly appwhich provides the most accurate and well researched Shariah compliant status of stocks listed in global markets. The app covers more than 30,000 stocks!
To get live updates on Shariah compliance status of stocks, download theIslamicly App
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Last modified: August 18, 2023
FAQs
HomeResearchIs it halal for Muslims to Invest in Shares listed on Stock Markets? It is permissible for Muslims to invest in stock markets if the company's Shares are in accordance with Shariah principles. Trading in shares on the stock market is absolutely fine from an Islamic view point.
Is stock market trading halal in Islam? ›
Buying stocks is not haram in general. As long as the company's shares are per Shariah principles, Muslims can invest in that stock. When you are a stock owner, you own a small percentage of the business. However, it is essential that you need to make sure the company in question is aligned with Shariah rules.
Which type of trading is halal in Islam? ›
Commodity Trading: Trading in physical commodities, such as gold, silver, oil, and agricultural products, is generally permissible as long as the transactions are conducted in a spot basis (hand-to-hand) and without excessive uncertainty or speculation.
Is Tesla a halal stock? ›
Yes, it's far halal to buy Tesla stock as long as the enterprise's operations aren't involved in any haram activities.
Is Amazon a halal stock? ›
Based on these instances, we consider that the business model that Amazon follows Amazon is in compliance to Halal investment guidelines.
Are Muslims allowed to invest in stocks? ›
Investing is permitted under Islam, but certain aspects of investment practice – such as charging or paying interest – are not.
Is daily stock trading halal? ›
When it comes to day trading – some scholars have agreed that it is permissible, even though their views primarily emphasize caution and strict adherence to Islamic principles, such as Shaykh Taqi Usmani and Dr. Wahba al-Zuhayli. However, there are still different views on it.
What type of stock trading is haram? ›
Margin trading, day trading, options, and futures are considered prohibited by sharia by the "majority of Islamic scholars" (according to Faleel Jamaldeen).
How to trade stocks halal way? ›
To trade stocks in a halal way, you need to adhere to Islamic principles that prohibit certain types of activities. Here are some guidelines to follow: 1. Invest in Shariah-compliant stocks: Look for companies that operate in permissible industries like technology, healthcare, or manufacturing.
What stocks are not halal? ›
This includes investments in companies or sectors that are engaged in Shariah non-compliant activities, such as:
- Institutions that deal with interest and excess debt.
- Alcohol.
- Pork-related products and non-halal food production, packaging and processing or connected activity.
- Gambling.
- Adult entertainment.
- Tobacco.
- Marijuana.
List of Halal Stocks in India by Market Capitalization
| Company Name | Ticker | Halal Ranking |
|---|
| Hindustan Unilever Ltd | HINDUNILVR.NS | ★ ★ ★ ★ ☆ |
| Sun Pharmaceutical Industries Ltd | SUNPHARMA.NS | ★ ★ ★ ☆ ☆ |
| Maruti Suzuki India Ltd | MARUTI.NS | ★ ☆ ☆ ☆ ☆ |
| UltraTech Cement Ltd | ULTRACEMCO.NS | ★ ★ ★ ★ ☆ |
11 more rowsRobinhood and its halal investing services
You can find halal companies by using a third-party screening service like Finbox. It provides services for Muslim investors to invest in halal securities in this way, even though Robinhood is not a fully halal trading platform.
Is Coca Cola halal stock? ›
So, based on the data mentioned above, we can say that Coca-Cola stock is an excellent option for Muslim investors because it passes all the criteria to be found halal and not haram. However, some other platforms run extra screening analysis to check the stock's compliance status.
Why is PRIME not halal? ›
No, PRIME products are not kosher. Is PRIME halal? While Prime products do not hold a formal Halal Certification; our products do not constitute any ingredients or manufacturing processes that would require such certification.
Is Mcdonalds a halal stock? ›
All food consumed at McDonald's comply with Halal requirements. Raw ingredients, cooking utensils and meals conform strictly with the Islamic Halal requirements of Bahrain. McDonald's applies the HACCP (Hazard Analysis and Critical Control Point) program to ensure food safety throughout the food supply chain.
Is Google halal stock? ›
Google's shariah compliance is questionable, as per Zoya right now. The following three revenue sectors make up 91.66% of their revenue. Based on whether these sections are shariah compliant or not will basically define whether the company is shariah compliant or not. The revenue segments are.
Which stock trading platform is halal? ›
Zoya offers several key benefits for Muslim investors looking to build shariah-compliant portfolios: Easily screen stocks, ETFs, and mutual funds for shariah compliance. Zoya provides detailed shariah compliance reports on thousands of securities to remove the guesswork.
What is a halal way to invest in stocks? ›
Halal investors can buy stocks as long as they're not from companies operating in prohibited industries or in a prohibited way. For example, buying stock in a liquor company such as Pernod Ricard would not be allowed, as alcohol is not permitted for Muslims.
Which stocks are halal to trade? ›
Halal Stock List 2024
- Nvidia (NVDA)
- AMD (AMD)
- Adobe (ADBE)
- Johnson & Johnson (JNJ)
- Nike (NKE)
- Peloton Interactive (PTON)
- Lululemon (LULU)
- Visa (V)
The first question arises in our mind whether the stocks listed on stock exchanges are allowed for trading in Islam? The answer is yes!
