Global Economics

In India, Dow Jones Meets Dharma


A new set of indices measuring such characteristics as good governance and eco-friendliness is winning favor with investors and gurus alike

Maharishi Mahesh Yogi, the Indian sage who taught transcendental meditation to the Beatles, died in the Netherlands on Feb. 5. Back in India, a new generation of gurus is promoting the latest thing to hit the Indian stock market: values investing. Not to be confused with Warren Buffett-style value investing, values-based investing draws on the principles of Indian religions such as Hinduism, Jainism, Sikhism, and Buddhism. Last month Dow Jones (DJ) launched the faith-based Dow Jones Dharma indices, which measure the performance of 254 companies that have characteristics like good governance and environmental friendliness in common.

Letters are pouring in to support the new group of five indices. They are not your typical congratulatory notes, but blessings and endorsements from assorted Indian spiritual leaders and scholars. "May the maximum number of investors utilize it, and thus globally advance core Hindu values," writes Shastri Narayanswarupdas, a religious leader from Ahmedabad in western India. Writes another: "Trust is the breath of business, ethics its limbs, to uplift the spirit its goal."

Praise like that "lends credibility to the index," boasts Nitesh Gor, chief executive officer of Dharma Investments, a faith-based investment boutique from Boulder, Colo., that dreamed up this scheme. Apart from the Dow Jones Dharma Global Index, there are four country-specific Dow Jones Dharma indices, for India, the U.S., Britain, and Japan.

Invest According to Religious Beliefs

Here's how the indices work. Even though there are four country-specific indices, Sumeet Nihalani, senior director for Asia Pacific sales at Dow Jones Indexes, says that the appetite for dharma or faith-based investing is "global and from people of different faiths and nationalities." So asset managers can create global or country-specific products using these indices, enabling Hindus, Buddhists, Jains, and Sikhs to invest in stocks that are in sync with their religious beliefs.

The dharma-compliant stocks, according to Gor, are those that adhere to the precepts relevant to good conduct. They include opposition to animal slaughter, support of the environment, and adherence to good corporate governance. Assorted temples, scholars, and academicians support the idea. Among them are the Jagannath temple, a leading temple in the eastern state of Orissa; Pejawar Math Swami, a spiritual Hindu leader; and Kabil Singh, head of the department of philosophy and religion at Thammasat University in Bangkok.

There's no shortage of companies that adhere to these Dharma principals. Already, in India, Dow Jones has compiled a list of 254 companies that are dharma-compliant. The full list is not yet available, but a few names provided by Dow Jones include HDFC Bank, ICICI Bank, leading engineering and construction company Larsen & Toubro, India's largest telecom player Bharti Airtel, and IT biggie Infosys (INFY). Dow Jones' Nihalani reveals that these companies passed the screen for "financial compliance, industry sector, business activity, and corporate and social responsibility."

Say Goodbye to Defense and Tobacco Stocks

Some of the "unacceptable sectors" are tobacco, aerospace and defense, brewers, casinos, gaming, and pharmaceuticals that in dulge in animal testing and genetic modifications. So Kolkata cigarette maker ITC did not make it on the list despite its successful agricultural business and contribution to getting rid of middlemen to put more money in the hands of poor farmers.

In the U.S., those that made the grade on the Dow Jones Dharma Global Index include IT majors IBM (IBM), Apple (AAPL), and Intel (INTC). They were approved by the indices' serpentine list of advisers. All companies are reviewed quarterly, and any found to be noncompliant at any time are out, says Nihalani.

Overseeing the methodology and dharmic principles is a council of religious practitioners and academicians from India and abroad. These include an assortment of Indian spiritual and religious figures, including some with a cult following, such as Sri Sri Ravi Shankar, who often talks at the U.N., and Hindu religious leader Sadhguru Jaggi Vasudev, who was seen around the snowy landscape of Davos in his robes. There are also Western academics such as Francis X. Clooney, professor of divinity and comparative theology at Harvard, and Richard Gombrich, a scholar of Buddhist studies at Oxford.

Muslims Already Embrace Social Investing

Socially responsible investing is still a new concept in India. But Muslims in the country do have experience using religious criteria for investing. In 1999, Dow Jones pioneered the Dow Jones Islamic Market indices, including companies that adhere to certain principals in Islamic law. For instance, companies on the index cannot operate businesses in entertainment and gambling or produce pork or alcohol.

With Islam in the lead, could Hinduism be far behind? It seemed obvious that targeting Hinduism, another major world religion, would bring in a larger segment of the Indian population and diaspora. There was already latent demand from asset management companies in India to create the Dharma indices, reveals Sumeet Nihalani. Over the years, Nihalani says, investors have become choosy and many want to invest "in line with their faith. It's just that demand for something like that comes up and indexes get created," he says.

Now, with the Dharma indices, Gor boasts that Dow Jones can address all the major Indian religions. "Our new indices complete the entire suite of religion-based investing demand," says Gor. Thanks to a bull market last year, the Dow Jones Dharma India Index gained 81.22%. In comparison, the Dharma Global Index gained 6.21%, Dharma Japan was down 4.79%, Dharma Britain was down 10.11%, and Dharma U.S. was down 3.62%.

Not Directly Available to Retail Investors

Some investment professionals are apprehensive about the application of the Dharma indices. They feel that unlike the huge following of the Islamic index, the other religions are not so focused on their investment plans. Moreover, it could exclude exciting sectors like entertainment and liquor. "It could just be a fad," says Sandeep Shanbhag, head of Wonderland Investments, a Mumbai investment advisory company.

Retail investors can't invest in the Dharma indices directly, only through related products like mutual funds. But fund houses and financial service providers are not yet divulging their investment plans in regard to these funds. Will there be takers? Dharma stocks have their own niche, says Atul Bodke, senior fund manager at Standard Chartered (SCBFF) Mutual Fund in Mumbai, particularly when environmental issues such as global warming are in the news. "Certain investors are ready to forgo a part of the returns on a stock, if the company adheres to certain principles. It's a win-win proposition for them."


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