India is turning out to be an intense battleground for Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT). Both companies have poured billions of dollars into this fast-growing e-commerce market, which is expected to hit $200 billion in revenue by 2027, according to Morgan Stanley estimates, and one of them seems to be coming out on top.

Walmart turns on the heat

Walmart was late to the Indian e-commerce scene, even though it had been operating physical cash-and-carry stores in the country since 2009. Walmart spent $16 billion to buy its way into the Indian e-commerce market through a 77% stake in Flipkart last year, and thus began the battle between the two giants for this lucrative opportunity.

Amazon enjoyed the upper hand against Flipkart before Walmart entered the fray, but things have changed now. Citi Research estimates that Amazon controlled 30% of the Indian e-commerce market at the beginning of 2018, the same as Flipkart. However, the market share numbers could tilt in Walmart and Flipkart's favor this year, going by the trends in the recently concluded festive-season sale period.

Market research firm RedSeer Consulting reports that Walmart's Indian e-commerce businesses -- Flipkart, Myntra, and Jabong -- cornered 63% of the sales during the festive period. Amazon was left with a market share of only 22%.

That's bad news for Amazon, because according to a Forrester estimate, Indians are expected to spend $4.8 billion on online shopping between Sept. 25 and Oct. 29. And 80% of the estimated festive period sales were supposed to have taken place between Sept. 25 and Oct. 4 -- the period in which Walmart has reportedly hammered Amazon by a huge margin.

Walmart A sign hangs outside Walmart store in Chicago, Illinois, Jan. 11, 2018. Photo: Scott Olson/Getty Images

RedSeer's report also points out that Amazon's market share during the 2018 festive season sale was 31%, higher than the 27% share it enjoyed the year before. The reported decline in Amazon's market share during the festive sale period in India isn't surprising if we consider that the company has been taking its foot off the pedal.

The Economic Times reports that Amazon has invested 2,800 crore rupees in its online marketplace in India this year, which is less than a third of the 9,450-crore-rupees infusion it made last year. The company took its eye off the ball and decided to spend money on building its physical footprint in the country. But this move seems to have cost it sales -- and market share -- during the lucrative festive period.

Walmart goes on the offensive, Amazon cools off

Indian business daily The Economic Times reports that Walmart-owned Flipkart has registered the FarmerMart name with an aim to move into the food retail business in India. That's a big market with annual consumer spending of $500 billion, and Walmart is in a strong position to make inroads into the same thanks to its existing infrastructure.

The report adds that FarmerMart will initially operate online, but it can also sell through physical locations. Flipkart CEO Kalyan Krishnamurthy says that the company has "secured all internal approvals" and is now in the process of securing the required government licenses. Walmart is going to spend 1,845 crore rupees (roughly $259 million) initially on this venture.

Walmart's move into the food retailing business in India through Flipkart is a logical one, since the company already has a network of 25 Best Price cash-and-carry stores in the country, along with two fulfillment centers. These stores -- which are typically spread across 50,000 square feet -- offer 5,000 items that include fruits, vegetables, groceries, and fresh, frozen, and chilled food.

What's more, Walmart will invest $500 million to take its total number of cash-and-carry stores in India to 70 by 2022. Walmart can use this expanded network of Best Price stores to fulfill food and grocery orders placed on Flipkart, since they already stock such items.

On the other hand, Amazon has faced a setback in a bid to shore up its grocery retailing business in the country. The company was looking to acquire a 10% to 25% stake in Reliance Retail, drawn by the latter's network of nearly 600 Reliance Fresh and Reliance Smart stores that sell more than 200 tonnes of fruit and 300 tonnes of vegetables every day.

However, a lofty valuation reportedly nixed the deal, as Reliance values its retail business between $35 billion and $42 billion. A 10% stake would have required Amazon to shell out billions of dollars to scale up its grocery retail business in India, which is still in its nascent phase. The company had launched Amazon Fresh in the South Indian city of Bengaluru earlier this year, with a plan to expand it into three more cities.

A stake in Reliance Retail could have fast-tracked Amazon's grocery business in the country, but it is now considering buying a minority stake in fashion retail chain Max, which carries a much cheaper valuation.

So Amazon's unwillingness to put up the money Reliance was asking for could lead to a missed opportunity in the wake of Walmart's latest move. What's more, Amazon seems to be pulling its punches in India after a solid start, as the slowdown in the pace of investment suggests. This doesn't bode well for the Jeff Bezos-led company, because India has the potential to be a long-term growth driver for Amazon.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Amazon. The Motley Fool has a disclosure policy.

This article originally appeared in The Motley Fool.