Eternal Shares Face MSCI Index Risk With IOCC Proposal: SEBI RA Harika Enjamuri Pencils Support At ₹222

Eternal, the publicly listed parent of Zomato and Blinkit, came under pressure after its board proposed converting the company into an Indian-owned and Controlled Company (IOCC), a strategic move aimed at boosting Blinkit's operational flexibility. 

Over 99% of shareholders voted in favour of the proposal.

However, the move raised red flags among global investors. In a note, Jefferies estimated that up to $1.3 billion in foreign institutional investor (FII) outflows could occur due to MSCI index implications stemming from the IOCC status change.

Harika Enjamuri, a SEBI-registered research analyst, has provided a detailed perspective on the recent developments surrounding Eternal. 

What is IOCC, and why does it matter?

By becoming an IOCC, Eternal would be able to stock and sell its own inventory and introduce private-label offerings, potentially improving margins in grocery and FMCG categories and granting Blinkit greater operational flexibility akin to traditional retailers

However, this transition comes with significant risks, particularly regarding foreign investor (FII/FPI) holdings. 

As of March 2025, FIIs held 44.8% of Eternal, close to the MSCI index’s maximum permissible foreign ownership of 46.5%

If the IOCC conversion results in a lower foreign investment cap and the actual holding exceeds this limit, MSCI may flag Eternal, triggering forced selling by foreign investors within five days and potentially leading to a reduction or removal of Eternal from the MSCI index during its next review in August 2025

The market has reacted with caution; Eternal’s stock dropped around 4% to ₹228.28 on Tuesday, following the announcement, reflecting investor caution over near-term outflows.

Despite these immediate headwinds, analysts note that the IOCC shift could position Blinkit for improved long-term profitability by enabling direct control over its supply chain and inventory. 

What's next for the stock?

Enjamuri notes that the stock faces resistance near ₹239.54 and trades below key moving averages, indicating short-term weakness. 

She identified support levels at ₹223.96 and ₹222.96, warning that a breach could push the stock lower to ₹206.61 or ₹199.28.

Enjamuri observed that Eternal's broader uptrend remained intact on the weekly chart, but neutral RSI levels and bearish candlestick patterns near resistance indicated a lack of clear momentum. 

Volume spikes at resistance also suggested ongoing selling pressure.

While a bounce toward ₹239 or even ₹262.27 is possible if ₹223–₹222 support holds, she emphasized the need for tight stop-losses and urged traders to exercise caution, adding that a sustained breach below ₹222 may trigger further downside in the coming weeks.

Eternal shares have fallen 18% so far this year.

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