Shares of aviation and retail firms which gained up to 24 per cent since government’s decision to allow overseas investments, are likely to attract demand in the near-term as well, experts have said.

Last Friday, the government allowed 51 per cent foreign investment in multi-brand retail, 49 per cent investment by foreign airlines in aviation and raised the FDI cap in broadcasting from 49 per cent to 74 per cent.

Stocks from these sectors have attracted buyers’ since the announcement and have surged as much as 24 per cent.

Shares of Kingfisher Airlines have gained 24.42 per cent, while Spicejet moved up by 10.43 per cent and Jet Airways by 2.15 per cent.

“In the coming days, demand for these stocks will grow in the wake of FDI announcement. Stocks have been rising as sentiments have improved after the FDI demands were finally met,” Geojit BNP Paribas Research Head Alex Matthews said.

From the retail pack, Pantaloon Retail India shot-up by 14.21 per cent, while Koutons Retail India surged 10.13 per cent and Provogue India gained 10.16 per cent. Among others, Shoppers Stop climbed 4.77 per cent, while Trent rallied 3.68 per cent.

According to Gajendra Nagpal, CEO, Unicon Financial Solutions: “The rally might continue in coming days. But one needs to be watchful of the political outcome of these decisions.”

From cable stocks, Dish TV has gained 2.73 per cent in the last two trading sessions.

Analysts at Edelweiss Research have said the decision to allow FDI is expected to be positive for the Indian retail sector, as it will reduce piling debt and stimulate investments.

“We believe that discretionary consumer goods and larger organised consumer players too will benefit as it will help increase consumption and prop volume growth,” they said.

The government had last year allowed 51 per cent FDI in multi-brand retail, but the same could not be implemented in the face of strong opposition from UPA allies, including Trinamool Congress.

The decision to allow foreign carriers to invest in domestic airlines would help cash-strapped carriers like Kingfisher to bring in strategic partners, experts said.

Similar could be the case for retail entities like Future Group’s Pantaloon Retail, Provogue India and Koutons Retail.

(This article was published on September 19, 2012)
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