We have demonstrated yet another example of how India inspite of tremendous potential could not outpace china because of the way things are done here. After days of negotiating with opposition and allies over the issue of allowing Foreign Direct Investment (FDI) in retail, the government today put the controversial issue on hold. West Bengal Chief Minister Mamata Banarjee, whose party Trinamool Congress is strongly opposed to the decision, made an announcement in Kolkata that Union Finance Minister Pranab Mukherjee spoke to her and told her that the FDI decision has been "suspended".
The decision would be deterrent to stocks of the companies like Panatloon Retail, CESC (Spencer Retail), Bharti and other companies in organized retail business.
Pantaloon Retail has gone up 40% in past 15 days, since the FDI in retail was announced. CESC went up marginally by 10% during the same period, but the decision protected the stock on the downside which might have happened as most of the other power companies stocks went down during that period.
Hence Investors should exit the counters immediately and no fresh investments should be considered until the clarity on FDI emerges.
The decision to put FDI in retail on hold could also impact the Indian stock markets in general over next few days as this would act as sentiment dampener for FII's, and domestic institutional investors. After FDI in retail was announced the stock market in India started stabilizing as the global investors felt that things will start to improve in India and in this winter session of Parliament lot of pending bills will be approved. But this rollback of decision would definitely impact the sentiments of global investors and hence we might underperperform going forward.