Fitch changes outlook for Indian retail sector to negative

Fitch Ratings said it revised the second-half 2012 outlook for the Indian retail sector to negative from stable in view of a sustained deterioration in the discretionary spending ability, which is unlikely to improve over the short term.

Fitch has revised down its real GDP forecasts to 6.5% and 7.0% from the earlier 7.5% and 8.0% in 2013 and 2014, respectively. The agency believes that the worsening business conditions could negatively impact credit profiles, while the impact on individual retailers would depend on their ability to manage their capital structures.

The Private Final Consumption Expenditure growth rate, which was weakest in the last seven years during the first half of 2012, is unlikely to improve significantly unless consumer price inflation declines and consumers receive a significant raise in real wages, the agency said.

Some of Indian retailers rated by Fitch are Pantaloon Retail India Ltd. (Fitch A-(ind)/stable/Fitch A1(ind)), Shoppers Stop Ltd. (Fitch A1+(ind)) and Tristar Retail Ltd. (Fitch BB-(ind)/stable/Fitch A4+(ind)).

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