Rs 3,100 crore mutual fund battle: Why MFs are ditching Zomato for Swiggy

Time of India

3 days ago

While retail investors may have taken a fancy for both the new-age stocks,
mutual funds
were seen dumping shares of soaring
Zomato
's parent
Eternal
while aggressively accumulating its rival
Swiggy
, even as the food delivery war intensifies and one stock rockets to fresh highs while the other struggles to move ahead.
Even as Eternal shares surged 17% in July and touched a fresh 52-week high of Rs 319.80 on BSE last Friday, mutual funds were busy booking profits worth an estimated Rs 1,700 crore last month by offloading 5.4 crore shares, according to data from Prime Database and
Nuvama
.
Meanwhile, they poured Rs 1,400 crore into Swiggy, snapping up 3.43 crore shares of the stock that's down over 26% year-to-date.
The contrarian bet appears to be a classic case of buying the dip and selling the rip. While Eternal has delivered a stellar 14% return year-to-date and hit fresh peaks, fund managers seem to believe the rally has run its course. Conversely, Swiggy's brutal 26% decline appears to have created a buying opportunity that institutional investors can't resist.
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Zomato vs Swiggy
ICICI Prudential Mutual Fund led the Zomato exodus with Rs 810 crore in sales, closely followed by Mirae Asset's Rs 820 crore disposal. Other major sellers included Kotak and SBI Mutual Fund. However, not all funds joined the selling spree. Axis Mutual Fund bucked the trend with Rs 375 crore in purchases, alongside Motilal Oswal and HDFC.
On the Swiggy front, the buying brigade was led by Mirae Asset, HDFC, SBI
MF
, Bandhan, and Invesco.
The timing couldn't be more telling. Eternal's 17% July surge came after a robust 21% rally in June, suggesting fund managers are taking profits after a strong run. Meanwhile, Swiggy managed just a 1% gain in July despite the heavy institutional buying, highlighting the stock's current struggles.
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What should investors do?
Goldman Sachs remains bullish on Zomato, raising its 12-month target price to Rs 340 from Rs 330 and reiterating a Buy rating with 25% potential upside. The investment bank raised its FY26E-30E revenue estimates by up to 11%, driven by strong demand trends in quick commerce.
"On the back of 1QFY26 results, our food delivery GOV/revenue estimates are higher by 1-2%. We raise our FY26E-FY30E quick commerce GOV estimates by up to 9% due to strong demand trends," Goldman Sachs noted.
Jefferies has turned even more optimistic, upgrading Eternal to Buy after earlier concerns about competition proved "unfounded." The brokerage highlighted management's significantly positive commentary, especially on quick commerce.
"Progress in Q/C suggests that our concerns on competition, which led to the d/g in Jan-25, were unfounded; we now u/g to BUY," Jefferies said.
For Swiggy, the Street sees a turnaround brewing. Jefferies upgraded the stock to Buy, noting that "Q1 profitability marked the trough" and expecting easing competition ahead.
"With a pause on dark store expansion in ST and easing in competition (JEF view), Q1 profitability marked the trough. Swiggy however remains prone to high volatility due to a low margin base," the brokerage cautioned.
Morgan Stanley has "lowered projections of consolidated adjusted EBITDA losses for F26-28" while HSBC values the entire Swiggy business at $11.4 billion or Rs 430 per share, with the food delivery business alone worth $8 billion.
(
Disclaimer
: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)