Shares of multi-retail firms soared on Wednesday after the Government’s plans to consider FDI investments in the organised retail space. Some multi-retail stocks even touched their highs on a day when the benchmark indices fell. The Ministry, in a discussion paper on Wednesday, said: “keeping in view the large requirement of funds for back-end infrastructure, there is a case for opening up of the retail sector to foreign investment.”

Trent, the retail operations arm of the Tatas which runs the lifestyle chain Westside, sky-rocketed more than 7 per cent to close at Rs 1,128.85 on the BSE. During the day it jumped to an all-time high of Rs 1,135. Pantaloon Retail rose 5.36 per cent to close at Rs 464.6 touching its 52-week high of Rs 469.95 in intraday trade. Shoppers Stop, too, touched a 52-week high of Rs 658. It closed up 11.54 per cent at Rs 626.15 on Wednesday.

The movement of these stocks was in contrast to that of the market as a whole; the Sensex was down 143 points (0.81 per cent) to close at 17471 on Wednesday. FDI is not allowed in the multi-brand retail space. In the single brand space, FDI is allowed up to 51 per cent. In the cash and carry segment, FDI of 100 per cent is permitted.

According to the ninth annual Global Retail Development Index study from management consulting firm A.T. Kearney, India is among the top 10 countries on the index’s 2010 mix. “India, last year’s top GRDI destination, fell to third. Retail growth will continue in India, but an influx of foreign players, limited and expensive desirable real estate and foreign investment restrictions have pushed the country’s retail market closer to maturity.” India was number one in 2009.

A recent McKinsey report said that India’s retail space is set to grow to $450 billion by 2015, comparable to Italy’s $462 billion market. “The game here has just begun, with organised retail accounting for just 5 per cent of today’s market and likely to expand anywhere between 14 and 18 per cent by 2015.”

“There are positives to this move (the government discussion paper) as a lot of foreign players are waiting on the sidelines for the FDI rules to come through. And many of them are looking at India with the long term in view,” said Mr Viraj Nadkarni, Research Analyst at Angel Broking. As the concept paper points out that it has been written keeping in mind the need to protect the smaller kirana shops or unorganised sector, bringing in FDI into the space will not harm them either, said Mr Nadkarni. “The jump in the share price of retail companies was a sentimental push following news of the concept paper,” said Mr Nadkarni. There is a huge potential for FDI in Indian retail, said Mr Amit Khurana, Head of Research at Dolat Capital Market. “A lot of foreign players will jump to it once the FDI norms come out. Wal-Mart has already tied up with an Indian player. Carrefour and other such retailers are testing the waters here. Home Depot has also shown interest here.”