 We shall continue with our conversation on investing in shares in a Sharia compliant way. Now the time is gone when people used to say that in Maulvis, the Sharia scholars are actually advising very large organizations, fund managers, investment companies to ensure that their businesses are in compliance with Sharia. Investing in stocks and shares was considered as a very sophisticated activity and people would think that Maulvis know nothing about it. And my own comment at the start of this segment, at the start of this topic was that in the beginning, the Sharia view on investing in stocks of the listed companies was based on at best an incomplete understanding of the phenomenon. However, now Sharia scholars involved in Islamic banking and finance, they are fully aware of what happens in financial market. And I must tell you that they have deep understanding of even very minute issues on the topic. I would like to use this one hypothetical example to highlight how Sharia compliancy of a stock could be or is observed by someone who has already invested in a Sharia compliant stock. So the picture in front of you has got price of a stock X on the vertical axis and the horizontal axis is actually the time horizon. At time t0 now an investor has bought Sharia compliant stock X. From now on, depending on what is happening in the market, the stock price would go up and down on a very frequent basis. Bazookat 5 minute may market changes very drastically. So this graph which you are looking at this could be one possible path for price movements of this stock. Now if at t0 when the stock was purchased and this was a Sharia compliant stock, if the price of the stock was $130, the debt equity ratio, you know the first ratio in our financial screens that was 23. Cash plus interest bearing securities divided by market cap was 13.5 or 13.5%. Receivables divided by market cap was 14% and impermissible income divided by total income was 2%. So this was the case. This is why this stock at time t0 was deemed Sharia compliant. Now once you have bought the stock, the market keeps on moving, the price can go up and this is happening here. Now because the Dow Jones, S&P Dow Jones methodology is denominated by market capitalization. So when for example the price goes there, this means this denominator would change. Market capitalization if what? Price of the stock of the company multiplied with the shares outstanding in the market. So if the price goes down, market capitalization will go down too. If market capitalization is less, this means this debt equity ratio will become bigger. In certain cases market capitalization has gone down so much that debt equity ratio actually may exceed this thing. This is a 33% threshold and that would be the time when the stock may become non-compliant. And accordingly they advise their clients, fund managers to take a decision. So a stock which started as a Sharia compliant stock may not remain a Sharia compliant stock after some time depending on the market condition. As a rule of thumb, if we see a graph like this one, it is actually quite possible that the stock would remain Sharia compliant. You have to answer me this question. Think about it but of course I can be generous, I can tell you why. If the price of the stock, stock price is moving up and up and up, this means market capitalization is becoming bigger and bigger and bigger. And because especially in case of S&P Dow Jones methodology, market cap is a denominator. This means debt over equity, this ratio would become smaller. If previously it was 23, this might become 15. Cash plus interest bearing securities divided by market cap would go down. Receivables divided by market cap would go down. This means in a rising market for a stock it is quite possible that Sharia permissibility of the stock is improving. Of course this is only a rule of thumb. I am talking about just an average kind of thing. If for example the stock goes down like this one and then it starts going like this one. At this point the stock is non-compliant. And at that point in time your Sharia advisor would tell you to get rid of this stock. However in general we find that if it is an upward trend market it is quite possible that a stock you have bought from the stock exchange would remain in compliance with Sharia. Actually its Sharia compliancy may improve. Now we have to look at certain things very carefully when we are holding a stock. Market actions are very important. Price is one thing. However there are certain market actions. Stock split for example. Stock splits happen quite frequently. And if a stock was doing very well so its price was going up the company may decide to split that stock into two. And this might have implications for the market capitalization and hence the ratios which we use for the financial screens for investing in listed stocks. Merges and acquisitions of course. You know they can have an important implication for Sharia compliancy. If a company has been acquired by another company. Now it is quite possible that if the company decides to retain the ticker of this stock. Second stock to merge in. Then market capitalization of this bigger company would go very big. And this might have implications for the ratios. A stock which was previously Sharia compliant may not be Sharia compliant or other way. Redemption of stocks by the issuer. There are 10 million stocks outstanding in the market and the company decides to redeem 5% of those stocks. Then price is there multiplied with the shares outstanding. Maybe the effect of that one is non compliancy of the stock which you bought as Sharia compliant. Let us quickly look at the example of Apple stock. Apple stock remains Sharia compliant more or less. And I would give you one very interesting example of Apple stock in one of the forthcoming modules. Apple stock is one of the most favorite stocks. Anyway people like Apple phones. Apple stock is a very good performer. Now Apple company has been split 5 times. First in 1987, then in 2000, then in 2005, then in 2014 and the last one was in 2020. Now this stock is about $565. It is so big. Last time the stock split was 7 for one. If you had one stock, then you split it by 7 for a little price. This has huge implications for Sharia compliancy because this would have definite effect on the debt equity ratio, receivables divided by market cap and so on.