The Qatari Investment Authority (QIA) has upped its shareholding in J Sainsbury for the second time in a fortnight in a swoop that has sparked a share price rally in Britain's biggest supermarkets.

Sainsbury’s today revealed that the QIA, which scrapped a £10.6 billion takeover bid for the retailer last year, had purchased 12.4 million shares to take its stake in the group from 25.3 per cent to just over 26 per cent.

QIA is sitting on losses of more than £1 billion from the stake it built in Sainsbury’s last year as it put together its takeover offer. It made two large stock purchases in 2007 at 575p and 595p before walking away as the credit crunch began to hit debt markets.

Shares in Sainsbury’s had plunged to their lowest level for four years before today’s announcement. By mid-morning the stock was up 3.5p at 283.5p.

Tesco's shares rose nearly 2 per cent today while Wm Morrison's stock edged up 2p to 249.5p.

Fears about the repercussions of the consumer downturn has resulted in retailers' market value falling to their lowest level since 1974 as analysts slash earnings forecasts.

Marks & Spencer's shares fell a further 4p at 232p today - the lowest level for eight years - on concern the retailer will be forced to cut its dividend after Wednesday’s unexpected profit warning.

Retail experts are now claiming supermarkets' low value could spark a round of consolidation in the coming months.

The oil-rich QIA has been ramping up its investment activities amid the credit crunch.

Last week, it emerged as the biggest investor in Barclays’ £4.5 billion fund-raising plans, which will see the group take a significant stake in Britain’s third largest bank.

Justin King, chief executive at Sainsbury’s, has continually said that the QIA remains a supportive shareholder.

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