* Pantaloon, other retailers surge on FDI measures
* Kingfisher, SpiceJet surge on hopes for investments
* Analysts caution against too much optimism
(Updates with details, comments from analysts, share prices)
By Nandita Bose and Anurag Kotoky
MUMBAI, Sept 17 (Reuters) - Indian Prime Minister Manmohan
Singh's unexpected easing of foreign ownership caps on airlines
and retailers underscored his resolve to win back badly dented
investor confidence, sending the shares of companies such as
Kingfisher Airlines Ltd and Shoppers Stop Ltd
Infighting in the fragile coalition government led by
Singh's Congress party had earlier forced it to shelve the
retail and aviation reforms. Coalition allies were anxious that
regulation changes in favour of foreign firms such as Wal-Mart
Stores Inc would cost them votes.
The so-called big bang reforms are a clear sign that Singh
is eager to demonstrate that the government is serious about
fixing an economy that has been hard-hit by a global slowdown
and political gridlock at home.
Indian retailers such as Pantaloon Retail India Ltd
surged as much as 30 percent in Mumbai trading on
Monday. Funds-starved Kingfisher jumped 19.9 percent.
But analysts warned against excessive optimism, given that
India had previously announced major reforms only to roll them
back later. The government had also previously struggled with
fine-tuning the details behind its big-policy initiatives.
"Any rollback would be disastrous," said Sudip
Bandyopadhyay, CEO of Destimoney Securities Pvt Ltd in Mumbai.
"Implementation of the reform measures would be key for markets
from here onwards."
India said on Friday it would allow foreign supermarkets to
buy up to 51 percent in a local partner, reviving measures it
had put on hold in December due to strong political opposition.
The action should benefit debt-laden companies in the
country's $450 billion retail market, but comes with stiff
provisions, including allowing state governments to make their
own decisions on whether to let in foreign supermarket chains.
"FDI is a positive, but it's not the panacea for the
sector," Macquarie Capital Securities India said in a note dated
"Even well-funded business groups have not been able to grow
their retail businesses rapidly. Similarly, despite its global
expertise Wal-Mart hasn't been profitable in China for the last
12 years," it said.
Investors bet that Future Group would benefit most from the
reform measures. India's biggest retailer runs the Big Bazaar
chain of hypermarkets and also has a stake in Pantaloon.
Future has been looking for a foreign partner to help fund
expansion and reduce a debt burden of almost 20 billion rupees
Other companies which are likely to benefit are Shoppers
Stop, whose hypermarket chain Hypercity has been seeking a
foreign partner. The shares rose 10.4 percent.
Major foreign retailers already have some operations in
India. Wal-Mart has a cash-and-carry tie-up with Bharti Retail
for wholesale stores, while Tata Group-owned Trent Ltd
has a supply chain agreement with Tesco PLC for its
Star Bazaar hypermarkets.
Similarly, the government's decision to allow foreign
carriers to buy stakes of up to 49 percent in domestic carriers
sparked widespread share gains in the sector.
Kingfisher, reeling under a debt load of $1.4 billion, has
been looking to raise funds. It said the government's measures
would help it "re-engage" with investors.
No foreign airline has so far publicly expressed their
interest in Kingfisher.
Investors were upbeat about SpiceJet Ltd, betting
that the budget carrier will attract foreign investments given
its healthy balance sheet and significant market share.
A SpiceJet spokeswoman told Reuters last week that it was in
initial talks with several Gulf carriers for potential
But analysts cautioned against expecting a queue of foreign
carriers looking to invest in India despite the aviation
sector's growth potential.
Dubai's flagship carrier Emirates said on Monday
that it had no plans to buy a stake in any Indian carrier.
India's airline sector is struggling with a big jet fuel
bill, high airport charges and steep competition in fares.
JPMorgan recommended investors to "sell into this rally."
"It is too early to assume that foreign airlines will pay a
significant premium to invest, given fundamental headwinds," the
investment bank wrote in a note dated on Monday.
($1 = 54.4150 Indian rupees)
(Additional reporting by Abhishek Vishnoi; Editing by Ryan Woo)