Retail stocks zoom ahead of FDI vote

Tags: News

LS verdict likely to boost market sentiment today

Indian stocks may continue to rally on Thursday after the government won a crucial vote in the Parliament on allowing 51 per cent foreign direct investment (FDI) in multi-brand retail, which saw stock prices of retail companies rising five to nine per cent in anticipation of a defeat for opposition motion against the key reform move.

Foreign investors, who have pumped in over $20 billion into Indian stocks, so far this calendar, will be buoyed by the government’s resolve to push ahead with the reforms, boosting sentiment further, analysts said. The benchmark Sensex and Nifty have gained over 25 per cent this year.

On a subdued session on Wednesday, the Sensex was nearly unchanged (up mere 0.23 per cent or 43.74 points to 19,391.86) but retail stocks gained sharply in the post lunch session as the Parliament debate on FDI in retail moved towards voting by the members of parliament in the Lok Sabha.

Alex Mathew, head of research, Geojit BNP Paribas Financial Services said, “This was much anticipated result, Nifty may touch 6000 level in short term but uptrend will be at a higher level after the recent sharp rally in the market. There will be some profit booking by people who would have taken position in anticipation of 51 per cent FDI in multi brand retail going through.”

Mathew also reckoned the currency to appreciate to 54-level to the dollar with more funds to flow into Indian market. “In equity, the retail stocks may see fireworks on Thursday, anoother sector that may also gain is real estate as retail and real estate have lot of synergy, already there was some spurt in realty and retail stocks on Wednesday,” he said.

With the fate of the voting outcome dependent on support extended to the ruling UPA Government by some parties like Samajwadi Party and Bahujan Samaj Party, the news flow with regards to the possibilities of both the UP-based parties voting either in favour of 51 per cent FDI in retail sector or may abstain from voting boosted the retail stocks.

Deven Choksey, MD, K R Choksey Shares & Securities said, “In anticipation of the vote in favour of FDI in retail, the stocks gained, though it is not certain these companies will get complete benefit, but market works on sentiment.”

“The vote in favour of FDI in retail will at least answer the sceptics though the benefits will take a long time to materialise, but some of these stocks will get re-rated,” Choksey said.

The retail stocks that gained at the close are Trent (5.62 per cent), Shopper Stop (6.91 per cent), Pantaloon Retail (4.06 per cent), Koutons Retail (5 per cent), Provogue (9.17 per cent), Cantabil Retail India (5.94 per cent).

RIL also has significant interest into organised retail along with oil and gas business, the company shares gained 0.89 per cent to close at Rs 832.

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