Retail stocks in demand ahead of Cabinet meet on FDI

24 Nov 2011 Evaluate

Retail stocks are in demand as the Union Cabinet is scheduled to meet today to decide on allowing foreign direct investment in the multi-brand retail.

Vishal Retail is currently trading at Rs 18.50, up by 1.30 points or 7.56% from its previous closing of Rs 17.20 on the BSE. The scrip opened at Rs 18.30 and has touched a high and low of Rs 19.20 and Rs 17.65 respectively. So far 88,353 shares were traded on the counter.

Koutons Retail India is currently trading at Rs 21.60, up by 1.65 points or 8.27% from its previous closing of Rs 19.95 on the BSE. The scrip opened at Rs. 20.30 and has touched a high and low of Rs 22.50 and Rs 20.25 respectively. So far 226,579 shares were traded on the counter.

Pantaloon Retail (India) is currently trading at Rs 188.30, up by 9.60 points or 5.37% from its previous closing of Rs 178.70 on the BSE. The scrip opened at Rs 182.00 and has touched a high and low of Rs 192.00 and Rs 182.00 respectively. So far 541,457 shares were traded on the counter.

Shoppers Stop is currently trading at Rs 360.00, up by 7.40 points or 2.10% from its previous closing of Rs 352.60 on the BSE. The scrip opened at Rs 355.00 and has touched a high and low of Rs 366.90 and Rs 355.00 respectively. So far 46,081 shares were traded on the counter.

The union cabinet is expected to decide whether to allow multinational retailers like Wal-Mart and Carrefour to operate in India with a majority stake. A decision on the issue is possibly only a matter of weeks as the cabinet will take a decision as early as next week.

The ministry of finance has been pushing for allowing 51% foreign direct investment (FDI) in multi-brand retail sector. The issue to allow FDI in retail sector has been in works for years however because of political disagreement the important policy reform has been getting delayed. Presently, India allows 51% FDI in single brand retailers and 100% for wholesale operations.

In the backdrop of a sluggish economic environment on global and domestic front, government is struggling to shake off an image of policy paralysis hence the momentum to open up the multi-brand sector too have picked up.

However, the issue is politically sensitive as the proposal of FDI in sector has been opposed by the smaller retailers. The small shop owners or kirana stores, which account for more than 90% of India’s $450 billion retail sector, have been opposing the entry of multinationals, fearing that they will be put them out of business.

In July 2011, the Committee of Secretaries approved the proposal to open the sector to foreign players. However, it recommended strict local sourcing requirements and minimum investment levels. These strict restrictions were backed by finance ministry.

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