Eternal has overtaken Tata Consultancy Services (TCS) in terms of weightage in the Nifty 50, highlighting the changing composition of India's benchmark index and the growing influence of consumer internet and growth-oriented companies. As of Wednesday, Eternal's weightage in the Nifty 50 stood at around 2.30%, compared with 2.06% for TCS, according to index data. As of September 30, Eternal had a weightage of around 2.29%, while TCS stood at roughly 2.08%.
The shift, however, does not mean Eternal is a larger company than TCS. The difference is largely a result of the free-float market capitalisation methodology used to determine Nifty 50 weights.
TCS has a significantly larger overall market capitalisation of around Rs 7.5 lakh crore, more than twice Eternal's roughly Rs 3.1 lakh crore. However, Tata Sons owns close to 72% of TCS, leaving a much smaller proportion of the company's total equity available for public investment and therefore eligible for the index calculation.
Eternal, on the other hand, has a much larger proportion of its shares available to public investors and does not have a promoter holding comparable with TCS. This gives it a substantially higher investable market capitalisation relative to its overall market value.
Kranthi Bathini, equity strategist at WealthMills Securities, said the difference in index weightage should not be interpreted as a fundamental comparison between the two companies.
"These are technical adjustments based on free float. You can't compare both as Eternal is new-age company and TCS is software services, and their market caps are different," Bathini said, adding that Eternal has a high free float due to its low promoter shareholding, while TCS has a high promoter holding.
The divergence in index weightage also highlights the contrasting investment narratives around the two stocks. TCS is an established IT services major with a long operating history, while Eternal's valuation is increasingly linked to its growth opportunities in consumer internet businesses, particularly quick commerce platform Blinkit.
The higher Nifty weightage for Eternal therefore reflects its higher investable market capitalisation and the market's expectations around future growth. It should not be read as an indication that Eternal has surpassed TCS in terms of business size or profitability.
Share Performance
Eternal shares closed 0.30% lower at Rs 328 on Wednesday. The stock has gained 2.5% over the past week and 2.24% in the last month. It is up 15.5% year-to-date but has declined 2.92% over the past year. Over a three-year period, Eternal shares have gained 214.03%, while the stock is up 139.24% over five years.
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TCS shares ended 0.94% lower at Rs 2,080.30 on Wednesday. The stock has gained 1.45% over the past week but declined 8.36% in the last month. TCS shares are down 35.54% year-to-date and 30.04% over the past year. Over three years, TCS has declined 42.56%, while the stock has fallen 46.56% over five years.
The contrasting performance underscores the different market narratives around the two stocks, with Eternal benefiting from optimism around its growth businesses while TCS has faced pressure amid concerns over IT spending, demand and the broader outlook for the technology sector.
Eternal Vs TCS: Buy, Sell Or Hold?
Bathini said both stocks can be considered on declines, but they suit different risk profiles.
"TCS is available at good valuation, so one can buy on dips. Eternal can also be bought on dips, but Eternal is for investors with high risk appetite, while TCS is for investors with low risk appetite," he said.
Analyst sentiment tracked by Bloomberg also remains positive on both stocks, although the degree of consensus differs. TCS has 29 buy recommendations, 13 holds and six sell calls. Eternal has 31 buy recommendations and three sell calls.
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