Comment

When people are willing to be gullible, opportunists will take advantage.

Last week, Dow Jones announced the launch of Dharmic stock market indices — presumably to help devout Hindus, Jains, and Buddhists invest in companies or mutual funds that keep their religious sensibilities in mind.

Ever since Islamic funds began talking about Sharia-compliant investments in India, smart operators have sensed a similar opportunity in catering to the needs of other religious communities.

I wouldn’t put my money in any of them, neither Sharia, nor Dharmic, nor any Christian fund — if they come a-knocking. These funds are either taking the religiously-inclined for a ride, or common investors, or both.

Religion-based funds fall between two stools: by claiming to follow religious injunctions, they probably dilute the criteria set by the holy books on where to invest; as investment funds, they end up diddling the investor, by artificially narrowing the list of companies to choose from.

A religious fund is nothing but adebased investment product aimed at marketing something to an audience that can’t say no.

Few customers believe in marketing hype anymore, but tell them something has religious sanction, and they are all willing to believe anything.

If I were to tell you that a sandwich without onion and beet in it will cost you as much as one including them, you will probably wonder if I am trying to cheat you. But if I call it a Jain sandwich, suddenly you might even be willing to pay a premium for it.

That’s the power of religion in marketing. What the humble sandwichwallah of Mumbai learnt years ago, mutual funds and financial product vendors are now learning to emulate. They have begun to use religion as a marketing tool.

In recent years, Muslims have beeneagerly flocking to seminars about Islamic investment vehicles.

You will soon have Dharmic mutual funds, too, vying for the investor’s money. But merely calling a product Islamic or Dharmic does not necessarily make it one.

The reason is simple: it is almostimpossible to comply with what religion prescribes. Let’s take a Dharmic fund which, presumably, will not invest in companies that produce armamentsbecause that would violate the principle of ahimsa.

This should rule out companies involved in making armaments, or parts that go into armaments. That would include almost every major engineering company in India. Even software companies are involved in military hardware, because there are more and more chips getting into armaments.

So where will it invest? To get around this problem, the advisory boards of such funds will try and prescribe that parts going into armaments should not exceed, say, 10 per cent of your turnover.

But this is nothing but fooling the people. If you are not a beef-eater for religious reasons, there is no point telling you that your sandwich has only 9.7 per cent beef. The rest of it is bread anyway.

Sharia-compliant banking alsoinvolves the same kind of jugglery. The prime requirement under Sharia is that a company should not be paying orreceiving interest. I can confidently assert that there is almost no worthwhile company anywhere in the world that can live up to this injunction.

One learns that Infosys is a Sharia-compliant company because it does not borrow or lend money. Now, this is a sham. Companies like Infosys have multi-crore treasury
departments whose only job is to make surplus money earn interest. Does this sound like being Sharia-compliant?

An investment fund should focus on generating the highest returns for theinvestor; artificially restricting thepotential universe of investible options is thus anti-investor. And if your logic isreligious, returns are unnecessary.

You can do your own due diligence and find the right opportunities to invest. Forming a public vehicle to meet that objective is a partial fraud. Investors beware.
Email: r_jagannathan@dnaindia.net