Retail stocks surge

Retail stocks surge

The Future group’s Pantaloon Retail gained the most, up 17 per cent in morning trade, and closed at Rs 234.05. Tata group’s Trent was up 7.84 per cent, while Shoppers’ Stop surged 4.77 per cent and CESC jumped 7.73 per cent as Spencer’s Retail is a unit of of CESC -- the power utilities business of the diversified RPG Group.

Analysts are of the view that FDI in retail benefit Pantaloon the most as it will help trim its huge debt and enable it to continue expansion. The company reported to had talks with French retail giant Carrefour. It will also help Tata’s retail venture Trent (headed by Ratan Tata’s half-brother Noel Tata) as it continues to seek tie ups with global retailers who are eagerly waiting to enter India. Trent may expand its tie-up with Britain’s Tesco, possibly for a front-end joint venture, as per analysts.

Among others, Reliance Retail, CESC’s Spencers’ retail, Aditya Birla Retail and Koutons too
stand to gain. Speculation is rife that Bharti could extend its back-end alliance with WalMart to the front-end. Till about a month ago most retailers’ stocks were depressed, weighed down by ballooning debts, slowing sales and lack of clarity on FDI till now. For instance, shares of Pantaloon, Koutons and Vishal Retail have fallen by 30-37 per cent since April this year.

Commenting on the move, Edelweiss Securities’ Harsh Mehta and Abneesh Roy said: “The decision to open the retail sector’s doors has come at the right time when global players, facing headwinds in their home countries, are scouting for new markets and on the other hand domestic players are strangulated by piling debt.”

Kotak Institutional Equities’ Manoj Menon and Amrita Basu said: “Cabinet approval is a step in the right direction to open up the retail sector to international players. The policy will give an opportunity to established domestic retail players to unlock value.”  

However, the cabinet approval is only the first step, and doesn’t mean that FDI will flow into the sector overnight.  The move is being opposed by opposition parties, and even the besides coalition partners are  saying that it would kill the mom and pop stores spread across the country.

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