Retail stocks gain as much as 6 pc on FDI norms relaxation

Retail stocks today rose by as much as 6 per cent following the government's decision to relax the FDI norms in single-brand retail.

Shares of Indian Terrain Fashions surged 6.66 per cent, Future Enterprises climbed 5.11 per cent, Provogue (India) rose by 4.93 per cent, Monte Carlo Fashions gained 3.99 per cent and V-Mart Retail went up by 3.68 per cent on BSE.

Among others, Future Consumer rose by 2.25 per cent, Shoppers Stop (2.01 per cent) and Trent (1.15 per cent).

"The government has undertaken another step of relaxing the FDI norms for investment in single brand retail, construction and aviation sector. With this the government has approved 100 per cent FDI in single brand retail via direct/ automatic route, thus opening the economic corridors for global single brand retailers like IKEA, NIKE, DELL etc and removing hurdles for investment in India.
 

"These developments will attract foreign investments and create employment opportunities in India. It will also encourage investments into supply chains thereby reviving the manufacturing sector," said Arun Thukral, MD and CEO, Axis Securities.

Foreign players in single brand retail trade will now be able to set up own shops in India without government approval.

This follows a Cabinet decision to allow 100 per cent FDI in single brand retail under automatic route, while also easing local sourcing norms.

Till date, 49 per cent FDI was allowed under automatic route, while beyond that government's approval was required.

Industry players welcomed the development saying it would help attract more foreign investments in the sector and boost the economy and generate employment.

"The liberalisation in single brand retail trading sector is a progressive move in the direction of 'ease of doing business' in India. Allowing 100 per cent FDI under automatic route should stimulate foreign investments in the sector. Further, allowing incremental sourcing undertaken by overseas group companies to be counted towards the 30 per cent sourcing commitment for the initial five years will provide the single brand retail trading companies the flexibility and time to align their retail and sourcing business," said Goldie Dhama, Partner - Regulatory, PwC India.