Eternal (Zomato) Share Price Drop Over 4% on May 27: Know Why

Eternal (Zomato) share price declined by over 4% on Monday, May 27. At 1:41 PM, it was trading at ₹226.81. This drop comes amid expectations of significant passive outflows from global investors due to index weightage cuts by FTSE Russell and MSCI, two major global index providers.

US$840 Million in Estimated Outflows

As per IIFL Capital Services, Eternal (Zomato) could see passive outflows worth US$840 million (around ₹7,152 crore) due to these adjustments.

• FTSE Russell is expected to trigger outflows of US$380 million (₹3,235 crore).
• MSCI’s May review could lead to outflows of US$460 million (₹3,917 crore).

These outflows are expected because the weight of Eternal in global indices is being reduced. This means index-tracking funds will have to sell some shares to match the new weights.

Foreign Ownership Limit Cut Behind the Move

The main reason for this index weight cut is a recent change in Eternal’s Foreign Ownership Limit (FOL), which has been reduced from 100% to 49.5%. FOL limits the maximum stake that foreign investors can hold in a listed company.

Unlike other adjustments which happen gradually, this FOL cut has resulted in a one-time full investability weight reduction. IIFL explained that this kind of change causes more pressure because selling happens all at once instead of being spaced out. 

When Will the Adjustment Happen?

FTSE Russell announced that it would apply the change on May 27. Eternal is a part of many important indices, such as:

• FTSE All-World Index
• FTSE MPF All-World Index
• FTSE Global Large Cap Index
• FTSE Emerging Index

This means many global funds that follow these indices will need to adjust their holdings, likely selling Eternal shares.

Eternal (Zomato) Share Price Performance So Far

Eternal (Zomato) share price has shown a mixed performance across different timeframes. Over the past three months, the stock has remained largely flat, reflecting a period of stability. However, it has declined by 17% year-to-date (YTD) and is down 18% over the last six months, indicating recent weakness. Despite this, the stock has delivered a 25% gain over the past year and an impressive 280% rally over the past three years, showcasing strong long-term returns.

You might like: Swiggy vs Eternal (Zomato): Who’s Leading After Q4 Results? 

Conclusion 

Eternal’s recent fall highlights the impact of global index adjustments and regulatory changes. While the long-term performance remains strong, short-term pressure from passive fund outflows may weigh on the stock for a while.
 
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