Eternal slumps ahead of FPI selloff after lowering investment limit

Eternal stock fell nearly 5% as passive funds prepare to sell over Rs 7,500 crore worth of shares following a cut in the FPI investment limit to 49.5%

Shares of Eternal (formerly Zomato) dropped almost 5 per cent on Monday ahead of an expected selloff by passive funds tracking MSCI and FTSE global indices. The selloff is driven by Eternal’s decision to lower the foreign portfolio investor (FPI) investment limit from 75 per cent to 49.5 per cent.

 

Shares of the company ended at Rs 226.7, down 4.6 per cent on the National Stock Exchange, where shares worth Rs 2,034 crore were traded.

 

According to Nuvama Alternative & Quantitative Research, funds tracking FTSE indices are expected to sell 109 million shares worth roughly Rs2,500 crore on Tuesday. Moreover, MSCI index-tracking funds are projected to offload 187 million shares worth Rs5,000 crore on Friday.

 

As of March 2025, foreign portfolio investors held a 44.88 per cent stake in Eternal, down from a peak of 47.3 per cent in September 2024. The stock hit an all-time high of Rs304.7 on December 9, 2024, following its inclusion in the derivatives segment.

 

Eternal’s board approved the reduction in the FPI investment limit on April 18, with shareholders endorsing it on May 19 with 99.85 per cent votes in favour. The move qualifies the company as an Indian-owned-and-controlled entity.

 

“Eternal has reset its foreign institutional investor cap to 49.5 per cent, a strategic shift to support Blinkit and align with Indian norms. This comes after its Rs8,500 crore qualified institutional placement (QIP) in November, which saw strong participation by domestic institutional investors (DIIs),” said Abhilash Pagaria, head, Nuvama Alternative & Quantitative Research, in a note.

 

Brian Freitas, an analyst at Periscope Analytics writing on Smartkarma, observed that Eternal’s weight in global indices going forward depends on available foreign investment room.

 

“If the float drops below 5 per cent, the stock will be deleted from one global index. That could happen as soon as September 2026. The stock will then need to stay out of the index for at least 12 months before being considered for re-inclusion,” he wrote. 

 

According to Freitas, at the end of March, the foreign room in the stock stood at 9.33 per cent, leaving enough room for the stock to remain in global indices.

 

However, if the foreign room falls below 3.75 per cent, the stock will be deleted from another global index, and passive trackers will need to sell 665.9 million shares at the close on August 26, Freitas wrote.

 

Market players said Eternal — which is part of both the benchmark Sensex and the Nifty — will remain in focus this week. They added that the stock’s downside hinges on buying support from DIIs.

 

Currently, DIIs hold a 24 per cent stake in the company, with mutual funds alone holding 19 per cent.

 

“If the stock comes under pressure, a strong tactical entry zone is Rs 215–220. Below Rs 205, there could be strong demand from DIIs, according to my interactions with a few funds,” said Pagaria.

 

Eternal had issued new shares in the QIP at around Rs 252.62 apiece.