"The message for retailers on India is clear: Move now or forego prime locations and market positions that will become saturated quickly," says Mike Moriarty, A.T. Kearney vice president. "Global retailers that missed opportunities to capture first-mover advantage in China can make up for it in India."

The annual study, which gauges retail investment viability in 30 emerging markets, is based on a set of 25 variables including economic and political risk, retail market attractiveness, retail saturation levels, and the difference between gross domestic product growth and retail growth.

This year, India replaced Russia in the top position thanks to a greatly improved investment climate and the recent relaxation of direct ownership restrictions on foreign retailers. According to the report, India's retail market totals $330 billion, is vastly underserved and has grown by 10% on average over the past five years.

The Kearney report anticipates that global retailers such as Wal-Mart, Carrefour, Tesco and Casino will soon take advantage of the more favorable FDI rules and enter India through partnerships with local retailers. The group also says that other retailers, such as Marks & Spencer and Benetton Group, which are currently operating through a franchise model, will most likely switch to a hybrid ownership structure. Combating the moves of global retailers, leading Indian retailers such as Pantaloon, Westside and Big Bazaar are expected to look to increase scale and enhance logistics and supporting technology.

While Russia remains attractive, the report says market saturation continues to increase indicating the time is now for retailers still thinking about entering the country. Despite Russia's drop, Eastern Europe continues to represent the best investment opportunities for retailers--Eastern European countries make up 11 of the top 20 investment destinations in the index.

Ukraine jumped eight places to third because of strong increases in GDP and retail sales, a highly fragmented market and large urban population. Bosnia-Herzegovina and Macedonia both entered the index for the first time this year. Joining India, Russia and Ukraine on the list of 10 countries retailers should enter immediately are China, Slovenia, Latvia, Croatia, Vietnam, Turkey and Slovakia.

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