Even as the broad market sentiment displayed a sluggish trend, shares of retail firms

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such as Pantaloon Retail, Koutons, Provogue India and Shoppers Stop rallied sharply after the government’s decision to allow 100 per cent foreign direct investment in single-brand retail raised expectations it may sooner or later permit higher FDI in multi-brand retail, which has been put on the back-burner recently due to lack of consensus amongst the political parties.

“Most of the retail stocks rallied sharply as the market is anticipating that the government may announce similar steps for multi-bran­d retail post elections. Most of the retail stocks have fallen sharply in the last one ye­a­r and valuations are also quite attractive...so we are expecting some momentum in retail stocks going ahea­d,” said Abneesh Roy, analyst with Edelweiss Capital.

Shares of Pantaloon Retail rose 4 per cent to Rs 152.55, Shoppers Stop jum­p­ed 4.9 per cent to Rs 303.45, Provogue India sca­l­e­d up 7.7 per cent to Rs 26.50 and Koutons Retail India soared 10 per cent to Rs 19.92. Broader Sensex ended higher by just 10.77 points (0.07 per cent) to 16,175.86.

Among other retail stocks, Lovable Lingerie shot up 20 per cent to Rs 386.30 and Brandhouse Retails flared up 10 per cent to Rs 15.75.

Shanu Goel, senior research analyst at Bonanza Portfolio said, “Sentiments improved after government formally cleared way for 100 per cent FDI in single brand retail outlets.”

Even as the government has temporarily put off its plans to allow 51 per cent FDI in multi-brand retail, several retail stocks continue to generate lot of buying interest in the past one month despite weakness in the broader market.

On Tuesday, the government okayed 100 per cent FDI in single-brand retail, which would allow famous global retail chains like Armani etc can open fully owned stores in India.

“Government has given enough indications on the reform front and 100 per cent FDI in single-brand retail was one of them. The government may also allow higher FDI in multi-brand retail, may be after the elections. Decision on multi-brand retail will be more important as several domestic retail companies are eyeing for higher foreign fund infusion in order to stay afloat and take on competition,” said Hemant Patel, analyst with Enam Securities.