Best Ethical ETFs in India 2026 — A Buyer's Guide for Ethical & Halal Investors

Five years ago the ethical-ETF universe in India was thin. In 2026 it has genuine depth. This guide compares the seven ETFs that actually make sense for ethical and Sharia-compliant Indian investors, ordered by how central each should be to a well-constructed portfolio.

How We Ranked the ETFs

Each ETF is evaluated on:

• Expense ratio — lower is better; anything above 0.5% for a passive fund is expensive.
• AUM — larger funds mean better liquidity and tighter bid-ask spreads.
• Tracking error — how faithfully the ETF follows its index; below 0.3% is good.
• Underlying screen — Sharia / ESG / values-based / thematic.
• Best-fit investor profile — Conservative / Moderate / Growth / Aggressive.

All figures below are approximate as of Q1 2026 and change over time — always verify current data on the NSE and the fund house website before investing.

1. Nippon India Nifty50 Shariah BeES (SHARIABEES)

The default core holding for any Indian Sharia-compliant equity portfolio. Tracks the Nifty 50 Shariah Index — a 30-40 stock subset of the Nifty 50 that passes both business-activity and financial-ratio screens.

• Expense ratio: approximately 0.42%
• Underlying screen: Sharia (activity + financial ratios)
• Best for: Conservative to Growth profiles as a core large-cap allocation.
• Portfolio role: 40-60% of the equity sleeve for Sharia investors.

2. Nippon India Gold BeES (GOLDBEES)

Not exclusively an ethical product, but gold is broadly acceptable across ethical frameworks and provides genuine portfolio insurance during equity drawdowns.

• Expense ratio: approximately 0.79%
• Underlying: physical gold (99.5% purity, RBI-approved vault)
• Best for: All profiles, as 5-15% of the total portfolio.
• Portfolio role: Uncorrelated diversifier and inflation hedge.

3. HDFC Nifty50 Shariah ETF

A newer entrant that tracks the same Nifty 50 Shariah index as SHARIABEES. Marginally lower expense ratio but smaller AUM means wider spreads.

• Expense ratio: approximately 0.35%
• Underlying screen: Sharia
• Best for: Cost-conscious Sharia investors who buy and hold.
• Trade-off: check liquidity and spreads on the day you buy — smaller AUM means wider spreads.

4. Motilal Oswal Nasdaq 100 ETF (N100)

Not Sharia-screened as a whole, but the underlying Nasdaq 100 has a much higher proportion of tech / healthcare / consumer names that individually pass most ethical screens. Muslim investors can screen the constituents individually or use SPUS (available via international brokers) for a fully Sharia-compliant US equity exposure.

• Expense ratio: approximately 0.58%
• Best for: Growth to Aggressive profiles wanting US tech exposure.
• Portfolio role: 10-20% of the equity sleeve for international diversification.
• Note: Muslim investors should verify individual constituents or use SPUS instead.

5. Bharat Bond ETF (any maturity)

A basket of AAA-rated PSU bonds. Interest-bearing so technically not Sharia-compliant for Muslim investors, but a solid ethical choice under most secular / ESG frameworks.

• Expense ratio: approximately 0.005% (yes, that low)
• Best for: Conservative and Moderate profiles as the debt allocation.
• Portfolio role: 30-50% of debt allocation for non-Sharia ethical portfolios.
• Not Sharia-compliant: use Sukuk funds or ethical debt alternatives instead.

6. HDFC Defence Fund (Defence ETF)

A thematic bet on Indian defence manufacturing. Some ethical frameworks (including strict Sharia) exclude weapons manufacturers; others (including many ESG frameworks) accept defensive weapons within democratic states. Investor discretion required.

• Expense ratio: approximately 0.65%
• Best for: Aggressive profiles as a thematic satellite.
• Values check: verify defence is acceptable within your personal framework.
• Portfolio role: 5-10% satellite position only.

7. Kotak Nifty PSU Bank ETF

Included here as an anti-recommendation. Conventional banking is excluded under Sharia screens and typically avoided in values-based frameworks. Listed only so readers see why it does NOT belong in an ethical portfolio.

• Not recommended for Sharia or most values-based frameworks.
• Interest-based banking model fails activity screens.
• Included in this list for clarity — do not confuse with the ethical options above.

Constructing the Portfolio

A concrete example allocation for a Moderate-profile Sharia-compliant investor:

• 40% SHARIABEES (India large-cap Sharia core)
• 15% N100 or SPUS (US large-cap growth diversifier — verify Sharia)
• 10% Direct Sharia-screened Indian mid-cap stocks (see the EthicoIQ Multi-Bagger Radar for candidates)
• 10% GOLDBEES (inflation hedge)
• 20% Sukuk fund or Islamic fixed-income (fixed-income sleeve)
• 5% Cash

The Bottom Line

The ethical ETF universe in India in 2026 is deep enough that a Sharia-compliant investor can build a diversified portfolio without stepping outside the NSE — with the possible exception of international exposure, which is easier through direct international brokerage or SPUS-style US ETFs.

Frequently Asked Questions