Eternal shares slip 4% after FTSE, MSCI cut stock weight; $840 million in passive outflows likely

The revisions come after a reduction in the Foreign Ownership Limit (FOL) for the stock. In the FTSE All World Index, Eternal’s investability weighting has been slashed from 82.74% to 49.5%.

The FOL determines the extent to which foreign investors can hold a company’s shares. A reduction in this limit forces global indices to adjust the stock’s weight to reflect its lower availability to foreign investors.

FTSE noted that while Eternal will remain part of the index, the total number of shares in issue—9,064,966,438—remains unchanged. The changes will take effect at the start of trading on Wednesday, May 28.

Eternal is currently included in the FTSE MPF All World Index, FTSE Global Large Cap Index, and FTSE Emerging Index. It is also part of the MSCI India Index.

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“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. We expect outflows of $380 million from this is a downward revision,” a note by IIFL Alt Desk said.Additionally, MSCI has announced a Foreign Inclusion Factor (FIF) adjustment for Eternal as part of its May review, which could trigger another $460 million in passive outflows. These adjustments will be effective from May 30, 2025.Eternal shares have come under pressure after nearly 99% of shareholders voted in favour of capping foreign ownership. According to Jefferies, the stock could see total outflows of up to $1.3 billion due to these changes.

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According to Trendlyne, the average target price for Eternal stands at Rs 272, implying an upside of nearly 14% from current levels. Among the 29 analysts covering the stock, the consensus rating is ‘Buy’.

Eternal shares closed at Rs 237.4 on Friday, up 3.6% on the BSE, while the Sensex rose 0.95%. The stock is down 14% year-to-date but has surged 275% over the past two years. Its current market capitalisation stands at Rs 2,29,147 crore.

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