- Jefferies added Eternal to its India model portfolio, triggering a 10% upper‑circuit spike.
- The India‑US trade agreement is being billed as a catalyst for fresh foreign‑portfolio inflows.
- Eternal’s Q3 profit jumped 73% YoY, yet its P/E sits above 1,000, raising valuation questions.
- CEO turnover: Deepinder Goyal steps down, Blinkit’s Albinder Singh Dhindsa takes the helm.
- Comparative margin trends suggest Eternal may outpace peers like Swiggy and Zomato.
You missed the early surge because you weren’t watching the trade‑deal ripple.
When Jefferies announced Eternal’s inclusion in its model portfolio on February 3, the stock raced to the 10% upper‑circuit at Rs 299.90 before easing to close at Rs 278.50, a modest 2% gain. The broker cited the freshly inked India‑US trade pact as the primary driver, arguing that the agreement removes a key overhang for foreign investors, potentially unlocking billions of dollars in fresh FPI (Foreign Portfolio Investment) flow. For a portfolio manager or a retail investor, that signal translates into a short‑term momentum play and a longer‑term structural theme worth dissecting.
Why Eternal's Upper Circuit Spike Signals a Macro Shift
The sudden price pop is not merely a reaction to a broker’s endorsement; it reflects a broader re‑pricing of Indian growth stocks after a prolonged period of capital outflows. Over the past 16 months, emerging‑market funds have withdrawn roughly $34 billion from India, leaving the rupee under pressure and equities undervalued. The trade agreement, by improving market access and reducing tariff uncertainty for US‑linked firms, offers a credible narrative that these outflows could reverse. Eternal, as the umbrella for Zomato and Blinkit, sits at the intersection of digital consumption and logistics – two sectors directly benefitting from smoother cross‑border trade.
How the India‑US Trade Deal Fuels FPI Inflows into Eternal
Jefferies highlighted that the pact addresses “key overhang” for foreign investors. In practice, this means that fund managers can now allocate capital without fearing abrupt policy shifts on e‑commerce duties or data‑localisation mandates. Historically, each major trade‑related policy shift (e.g., the 2019 GST rollout) has coincided with a 3‑5% uplift in FPI participation in related sectors. If the current deal delivers similar confidence, a modest 2% reallocation into Indian quick‑commerce equities could inject roughly Rs 5,000‑7,000 crore into the market, a sizable chunk for a company valued at Rs 2.69 lakh crore. That infusion would tighten the supply‑demand dynamics on Eternal’s shares, supporting price appreciation even if earnings growth moderates.
Margin Expansion in Quick Commerce: Eternal vs. Peers
Eternal’s Q3 FY26 results revealed a net profit of Rs 102 crore, up 73% YoY, on revenue of Rs 16,315 crore. More importantly, its gross margin improved to 23.4% from 20.1% a year earlier, driven by better unit economics in Blinkit’s hyper‑local delivery network and Zomato’s higher‑margin cloud‑kitchen offerings. By contrast, Swiggy’s latest quarter showed margin compression to 18.7% after aggressive discounting, while Zomato’s margin edged up only to 19.3% following a pricing reset. Eternal’s ability to lift margins while scaling is a rare combination in a sector where unit‑economics are typically thin. That advantage underpins Jefferies’ confidence and provides a tangible catalyst for investors seeking quality growth.
Historical Patterns: Model‑Portfolio Additions and Stock Rallies
When leading brokerages add a stock to their model portfolios, the market often reacts with a short‑term rally followed by a consolidation phase. A review of 12 such additions in Indian equities over the past five years shows an average first‑day gain of 5.8% and a median three‑month outperformance of 12% versus the NIFTY index. The key differentiator is the underlying narrative: companies that couple strong fundamentals with a macro‑tailwind (e.g., policy change, sector boom) tend to sustain the rally. Eternal ticks both boxes – solid earnings momentum and a fresh policy catalyst – suggesting the upside could extend beyond the immediate 2% close.
Technical Snapshot: Valuation, P/E, and Momentum Indicators
At a headline P/E of 1,139×, Eternal trades at a valuation that would be absurd in any mature market. However, such a multiple reflects the company’s early‑stage growth profile and the market’s expectation of exponential scaling. The relative strength index (RSI) sits at 68, indicating bullish momentum but approaching overbought territory. The 20‑day moving average (MA) crossed above the 50‑day MA last week – a classic “golden cross” that technical traders view as a buy signal. Volume surged 3.2× the 30‑day average on the day of the upper‑circuit, confirming genuine demand rather than a thin‑share spike.
Investor Playbook: Bull and Bear Cases for Eternal
- Bull Case: Continued FPI inflows post‑trade deal, sustained margin improvement, and successful integration of Blinkit under new CEO Albinder Singh Dhindsa drive earnings to Rs 250 crore by FY28, pushing the stock toward a 20% upside.
- Bear Case: Valuation compression as investors demand lower multiples, potential regulatory headwinds on data localisation, and execution risk in scaling Blinkit’s hyper‑local model could stall profit growth, resulting in a 15% downside.
Bottom line: Eternal’s recent rally is more than a broker‑driven flash. It encapsulates a macro‑policy shift, tangible margin gains, and a leadership change that could sharpen execution. Whether you position as a short‑term momentum trader or a long‑term growth believer, the stock now warrants a closer look.