For Muslim investors, knowing whether a stock is Shariah-compliant is a fundamental requirement before investing. Pakistan's stock exchange has one of the most developed Islamic finance frameworks in Asia — yet many investors still don't know exactly how compliance is determined or where to find verified Shariah-compliant stocks.
This guide covers everything: the screening criteria, the relevant indices, and how to find compliant stocks today.
What makes a PSX stock Shariah compliant?
A stock is considered Shariah compliant when it passes two types of screening — sector screening and financial ratio screening. Both criteria must be satisfied.
Sector screening (business activity)
Companies are excluded if their primary business involves:
- Interest-based financial services (conventional banking, insurance)
- Alcohol production or distribution
- Tobacco
- Weapons and defence manufacturing
- Pork and related products
- Gambling and entertainment
This immediately excludes most conventional banks and insurance companies from Shariah portfolios, which is why sector allocation in Shariah indices looks significantly different from the broader KSE-100.
Financial ratio screening
Even if a company's business is permissible, it must pass financial ratio tests. The AAOIFI (Accounting and Auditing Organisation for Islamic Financial Institutions) standards — which Pakistan's Shariah supervisory boards follow — apply these thresholds:
- Debt ratio: Total interest-bearing debt must be less than 37% of total assets
- Non-permissible income: Less than 5% of total revenue from non-Shariah-compliant sources
- Receivables: Non-liquid receivables should not dominate assets
These ratios are recalculated periodically as companies report new financial statements. A stock can move in or out of compliance as its balance sheet changes.
The KMI-30 Index
The KMI (Karachi Meezan Index) 30 is PSX's primary Shariah-compliant benchmark. It tracks the 30 most liquid Shariah-compliant companies on PSX, weighted by free-float adjusted market capitalisation with a 12% cap on any single constituent.
The KMI-30 is reviewed semi-annually. It represents the investable core of Shariah-compliant equities on PSX and is used as the benchmark for Islamic mutual funds.
The broader KMI All Shares Index covers all Shariah-compliant stocks regardless of liquidity, giving a more complete picture of the Shariah universe on PSX.
February 2026: PSX proposes dedicated Shariah trading counter
In a significant development for Islamic investors, PSX published a consultation paper in February 2026 proposing a dedicated Shariah-compliant trading counter within the existing market structure. The proposal aims to:
- Create a segregated trading environment for Shariah-compliant securities
- Provide clearer regulatory distinction for Islamic investors
- Support the growth of Pakistan's Islamic capital markets
Stakeholders were invited to submit feedback by March 2, 2026. This is a meaningful signal that the regulatory environment for Shariah investing in Pakistan is strengthening.
How many PSX stocks are Shariah compliant?
Approximately 35–40% of PSX-listed companies pass Shariah screening. The exact number fluctuates as companies update their financial statements and ratios are recalculated. Key sectors with strong Shariah-compliant representation include:
- Fertilizer (FFC, EFERT, FATIMA)
- Cement (LUCK, DGKC, MLCF)
- Oil and gas exploration (MARI, OGDC, POL)
- Technology (TRG, SYS)
- Food and consumer goods (NESTLE, UNITY)
Finding Shariah-compliant stocks on Ticker Analysts
On Ticker Analysts, every company page shows a Shariah compliance indicator. The stocks directory includes a Shariah filter — toggle it to see only compliant companies.
Each stock page on Ticker Analysts shows:
- Shariah compliance status with a visual indicator
- Financial ratios relevant to compliance assessment (debt ratio, revenue breakdown)
- P/E, dividend yield, ROE and full financial statements
You can also use the Stock Screener to build a custom screen combining Shariah compliance with fundamental criteria — for example, Shariah-compliant stocks with a P/E below 10x and dividend yield above 5%.
Key Shariah-compliant stocks worth watching in 2026
Rather than a static list (which changes as financial ratios update), here's what to look for by sector:
Fertilizer: This sector has historically been one of the most compelling for Shariah investors. Companies like FFC and EFERT carry minimal debt and generate strong cash flows, keeping their financial ratios well within Shariah thresholds.
Cement: Most cement companies are Shariah compliant. The sector benefits from Pakistan's infrastructure spending cycle and has produced strong multi-year returns.
Oil and gas exploration: OGDC, MARI, and POL are typically Shariah compliant. Government-backed with long-reserve lives.
Technology: TRG and SYS are the standout names. Asset-light business models make them naturally compliant on financial ratios.
Building a Shariah-compliant portfolio on PSX
A balanced Shariah portfolio on PSX might look like:
- 30–40% in dividend-paying blue chips (fertilizer, energy)
- 25–35% in growth sectors (technology, consumer goods)
- 15–25% in cyclical sectors (cement, chemicals) timed to economic cycles
- 10–15% in cash or liquid instruments during uncertain periods
The goal is the same as any diversified equity portfolio: own quality businesses at reasonable valuations, diversified across sectors, with a multi-year holding horizon.
Shariah compliance status shown on Ticker Analysts is based on available financial data and should not be taken as a formal Shariah ruling. Consult a qualified Shariah advisor for investment decisions that require religious compliance certification.