Eternal share price falls 4% after FTSE, MSCI weight reduction; $840 million worth passive outflows likely

Eternal share price declined 4% in early trade on Monday amid expectations of substantial passive outflows following index weightage cuts by global index providers FTSE Russell and MSCI. Eternal shares dropped as much as 4% to ₹227.95 apiece on the BSE.

According to estimates by IIFL Capital Services, Eternal, earlier known as Zomato, could witness passive outflows of approximately $840 million due to the impending rebalancing.

Of this, FTSE Russell’s adjustment is expected to trigger outflows of around $380 million (approximately ₹3,235 crore), while MSCI’s scheduled May review may result in outflows worth $460 million (approximately ₹3,917 crore).

The index weight reductions follow a recent cut in Eternal’s foreign ownership limit (FOL) — from 100% to 49.5%. The FOL governs the maximum stake that foreign investors are allowed to hold in a listed entity.

“Unlike headroom-related reductions (which are implemented in a phased manner), a direct FOL cut may lead to a full investability weight reduction in a single step during this interim event,” IIFL said in a note.

This one-time adjustment significantly intensifies near-term selling pressure, as the full reduction in investability weight is applied all at once, rather than being phased in over time.

FTSE Russell announced on Friday that it will implement the adjustment to Eternal’s investability weight on May 27. Eternal shares currently are included in several of FTSE’s major indices, including the FTSE All-World Index, FTSE MPF All-World Index, FTSE Global Large Cap Index, and FTSE Emerging Index.

Eternal Share Price Performance

Eternal share price has shown a mixed performance across different timeframes. Over the past three months, Eternal share price has remained largely flat. However, the stock has declined 17% year-to-date (YTD) and is down 18% over the last six months.

Despite recent weakness, Eternal shares are up 25% on a one-year basis and have delivered strong long-term returns, rallying nearly 280% over the past three years.

At 9:40 AM, Eternal share price was trading 3.20% lower at ₹229.85 apiece on the BSE.

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