Retail stocks take a hit as AAP says no to FDI-funded stores in Delhi

The stocks of retail firms took a beating on the Street a day after the Delhi government officially shut its doors to foreign-owned supermarket groups from setting up shop in the country's capital.

Reacting to the news, Trent slipped 2.73% to Rs 1,136.45 on the Bombay Stock Exchange (BSE); Pantaloon shed 0.35% to Rs 85; Future Retail 1.32% to Rs 82.55; Shoppers Stop 1.55% to Rs 394.80; Kewal Kiran 1.1% to Rs 1,167.00; Brandhouse Retail 1.38% to Rs 2.86 and Provogue 2.73% to Rs 8.90, as of 11:45 am.

The Aam Aadmi Party-headed government in Delhi yesterday wrote to the department of industrial policy and promotion (DIPP) seeking to withdraw its permission to allow FDI in multi-brand retail in the state, once again underscoring political risks from administrative changes to investments in the sector, reported ET.

This has created fresh uncertainty for a sector that had only last month received its first investment proposal after a high-stakes policy change 15 months ago.

Delhi Chief Minister Arvind Kejriwal justified the government's decision, saying foreign participation into the supermarkets sector would exacerbate the city's unemployment problem. "FDI provides a wide range of choice to consumers, but it has been seen in several countries that it has let to unemployment. There is a huge unemployment problem in Delhi. We don't want to increase it further," he said.

Kejriwal said he was not opposed to FDI, but it had to be decided on a sector by sector basis and that he would soon meet with industrialists to discuss further changes.

The government's actions, although along expected lines because it was a key item in AAP's election manifesto, could dissuade foreign supermarket chains waiting on the sidelines from taking the plunge and committing investments, reported ET.