Fitch Outlook for the Sector

The Indian retail market, is the fifth largest retail destination globally, it has been ranked second after Vietnam as the most attractive emerging market for investment.

With deteriorating macro economic conditions in India, the retail sector is one of the worst hit sectors. Retailers have already faced the heat by negative sales growth and declining margins. Same store Sales has been negative for some of the India’s largest retailers. For the current year the retail sector will have a negative growth trend, however the trend is expected to revive in long term.

Resource optimization and re-evaluating store viability will remain key priorities in CY 09, which could lead to store closures and scale back in expansion activities. Retailers will be expanding the activities on the value format segments which will give rise to intense competition.

Fitch thinks that Retailers will significantly cut down on there expansion plans. Retailers have relied on debt funds to fund there expansion plans, this could result further liquidity strain during the current year. However, established and business conglomerates with deep pocket will continue to expand maybe at a slower pace though.