News: What is India's Walmart?

(TV18 12/05/2006) Mumbai - With stocks like Pantaloon Retail and Trent notching huge gains of 305% and 125% respectively in the last one year, Moneycontrol asked analysts about the future of the retail segment, in terms of further appreciation. While all the analysts are bullish on the sector hands-down, they caution investors to analyse the pros and cons of a retail stock before joining the retail bandwagon.

The reason for their cautiousness stems from the fact that recently listed stocks like Shoppers’ Stop and Provogue India have more or less remained lacklustre due to a number of reasons. Shoppers’ Stop (-2.1%) and Provogue (-28%) have given negative returns for those investors who bought them at close on the listing day.

Here’s a take on what experts think about the sector and the stocks in this sector.

Suraj Saraogi, Keynote Capital

Renewed FII interest in Pantaloon and Trent

Investors should hold on. Right now there is a lot of talks of FIIs showing more interest. In top retailing counters like Pantaloon and Trent, FIIs have already reached the maximum permissible limits. Somehow, there seems to be some renewed FII interest in these stocks. So accumulation is on with an eye on the government’s moves on increasing the FDI limit in the sector. Because of these reasons, investors should stay invested in the sector. Pantaloon will hugely benefit if any such government decision comes through.

Trent and Pantaloon can still give 50% appreciation

I am pretty bullish on Trent and Pantaloon. Over 50% appreciation is possible from these levels for those investors with a 6-12 month investment horizon.

Dipan Mehta, Member, BSE

Retail's on the move

I think the retail sector is on the move. Although the sector has got great prospects, it is not the right time for investors to get on to the bandwagon.

Stay invested

At the same time, those who are already invested should continue to ride the bull run because these investors have already made a lot of profits. And although they may not get same kind of spectacular returns that they may have got earlier, they can still expect to get market-performing returns.

What to look out for?

Investors should look at past track record of the companies that they want to invest in. They should look at what the historical growth rate has been. Second, they should look at the business model. Like investors must keep a keen eye if the topline increases after a company increases retailing outlets. Sometimes, a company increasing retailing outlets does not translate into higher topline or higher profits.