Market Overview

Wal-Mart Eyes India


Many analysts believe that foreign direct investment in India's retail sector could help the country tackle many problems including widespread inflation and rampant spoilage of food. You can now add America's largest retailer to that growing list.

India will “ultimately” loosen restrictions on foreign investors that are currently limiting its presence in one of the biggest untapped retail markets, according to head of Wal-Mart's (NYSE: WMT) International division, Doug McMillon. McMillon speaking to the Financial Times said, “They're listening and they're trying to do what's best for their country and I believe ultimately that will include the opening of FDI.” This comes on the back of a recent plea by CEO Mike Duke for India to open up its retail sector to foreign direct investment.

Wal-Mart has been looking abroad to help offset the flat results of its locations in the U.S. Fellow BRIC members, China and Brazil are already central to its growing global portfolio. However, due to Indian laws, Wal-Mart is limited to just six wholesale stores and a joint venture with Bharti Enterprises.

Most likely, FDI in India's retail sector will come with a lot of restrictions, such as caps on the size of foreign stakes in retailers and requirements for local product sourcing. However, if India does come around, it could be huge for Wal-Mart and its investors. The retailer seems to be moving ever-closer to being a real international force. If anyone is to benefit from India's retail environment, it would be Wal-Mart. Any news on India's change of heart, would lift shares.

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