How reforms have unleashed speculation in retail, aviation stocks?

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 Reforms have led to speculation in retail, aviation stocks
Trent: Quotes, News
BSE 203.70BSE Quote6.05 (2.97%)
NSE 203.70NSE Quote5.5 (2.70%)
The government's push for foreign direct investment (FDI) in multi-brand retail and aviation has led to stocks from these sectors witnessing huge bouts of speculative activity.

Soon after trading began on Monday (Sept 17) after the announcement, aviation stocks jumped with Kingfisher Airlines rallying more than 20 per cent, while Spice Jet was up more than 12 per cent.

Retail stocks too led from the front, with Future Group firm Pantaloon Retail surging as much as 32.61 per cent on Monday to Rs 209, while Provogue India gained 17 per cent, Brandhouse Retail soared 18.58 per cent and Koutons Retail India also rising smartly.

The surge in these was accompanied by huge volumes and less delivery, clearly indicating a high level of speculation. By Thursday, however, the euphoria had died down completely.

Pantaloon Retail was back top Rs 174, after surging to a high of as much as Rs 209 on Monday. Similarly, King Fisher Airlines which surged by 20% on September 17, dropped by 8% on September 20, 2012. Brand House Retail and Trent too dropped on Thursday, following other aviation and retail stocks.

The government it may be recalled had announced FDI in multi-brand retail and aviation, which led to a surge in these stocks.

However, analysts believe that FDI in multi-brand retail and aviation is more sentimental driven and the sharp rally in stocks over the week is hardly justified. There is unlikely to be a huge gush of foreign investments, particularly in view of the opposition from various states to FDI in multi-brand retail.

Moreover, there has been no statement from foreign companies regarding a decision to establish operations here, primarily on account of the huge opposition in multi-brand retail. Stocks in these sectors may continue to lose momentum as there maybe speculative unwinding.

GoodReturns.in

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