Bombay Stock Exchange along with Taqwaa Advisory and Shariah Investment Solutions (TASIS) launched a Shariah compliant index on Monday in an effort to attract more investors from India and abroad.
The index allows investors to buy stocks without violating Islamic investment guidelines.
"Before anyone can attract investors, we need to put in place institutional infrastructure, and having an index to track Shariah compliant stock is important," M.H. Khatkhatay, senior adviser to TASIS, told Reuters on Monday.
"If you have an ETF (exchange traded fund), for example, you need an index, or if overseas investors want to invest in Shariah index in India, this is an invitation for people to come and invest," he said.
The BSE TASIS Shariah 50 index includes some of India's market leaders such as conglomerate Reliance Industries Ltd, IT services provider Tata Consultancy Services, car maker Maruti Suzuki, and telco Bharti Airtel, the stock exchange said.
The rival National Stock Exchange has a Shariah index, linked to the Standard and Poor's Shariah-compliant index.
Shariah-compliant investments are available in a handful of countries globally, particularly those with large or majority Muslim populations.