Retail stocks recover, but uncertainties linger over FDI

Moneycontrol Bureau

Most retail stocks recovered on Wednesday after some tough talking by Prime Minister Manmohan Singh raised hopes that the government would stay firm on its decision to allow 51% foreign direct investment in multi-brand retail.

Stocks like Shoppers Stop, Trent, Koutons Retail among others were up 1-3% in morning trade. Pantaloon Retail opened 4% up, but gave up all its gains and was down marginally.

The Cabinet had last week approved 51% FDI in multi-brand retail, a move allowing multi-national chains like WalMart, Tesco and Carrefour among others to open shop in India.  However, opposition political parties and even some of Congress' allies in the UPA government have vehemently opposed this move and called for a U turn, saying entry of the big retail chains will kill small traders and mom and pop stores in India.

On Tuesday, Prime Minister Singh seemed to be firm on sticking with the decision already taken by the government. He said the decision to open up the sector was taken after a lot of consideration, and it would in fact, improve rural infrastructure, reduce wastage of farm produce and enable farmers to get better prices for their crops.

While staying firm, Singh said that the government is not forcing the decision on anyone, and states who are against FDI in multi-brand retail, have the option to opt out of it.

However, differences still remain, and more so within the Congress party itself. For instance, Sanjay Singh, Congress MP from Uttar Pradesh and the Kerala state Congress unit have already voiced their opposition to opening the front-end for foreign retailers.

Finance Minister Pranab Mukherjee and UPA chairperson Sonia Gandhi met MPs today to brief them on the government