Zomato and Swiggy Stocks Surge 6% on Brokerage Upgrades

Introduction: Renewed Investor Interest in Food Delivery

Shares of food and grocery delivery platforms Eternal (parent company of Zomato) and Swiggy experienced a significant rally, climbing by up to 6% in intra-day trading on Tuesday. This surge, accompanied by heavy trading volumes, extended gains from the previous session and signaled a potential shift in investor sentiment. The positive momentum comes despite both companies underperforming the Sensex over the past six months, where Swiggy declined 13% and Eternal fell 1% against the benchmark's 5% gain. The renewed buying interest appears to be fueled by a series of bullish brokerage reports highlighting improving fundamentals and a clearer path to profitability.

Market Performance and Trading Volumes

On Tuesday, Eternal's stock was a standout performer, rallying 6% to an intra-day high of ₹306.45 on the BSE. This marked an 8% increase over just two trading sessions. The move was backed by substantial trading activity, with average volumes on the counter jumping 1.5 times. A combined total of 64.77 million equity shares were traded across the National Stock Exchange (NSE) and BSE, indicating strong institutional interest. This recent activity is notable, though the stock remains below its 52-week high of ₹368.4, which was recorded on October 16, 2025.

Brokerages Turn Bullish on Sector's Prospects

Several brokerage firms have issued positive outlooks for the food delivery sector, with Motilal Oswal being particularly vocal. The firm upgraded its growth estimates for the food delivery business for both Swiggy and Zomato to a range of 21-23% for FY26-FY27, a notable increase from its earlier projection of 19-20%. This optimism is based on a faster-than-expected recovery in top-line growth, improving unit economics, and enhanced visibility on profitability. To reflect this confidence, the brokerage also raised its valuation multiple for the food delivery segment from 27x to 35x FY27E adjusted EBITDA.

Swiggy: A Turnaround Story with High Upside

Motilal Oswal has reiterated a 'Buy' rating on Swiggy, with target prices ranging from ₹440 to as high as ₹560 in its recent reports. A target of ₹560 implies a potential upside of 32% from current levels. The brokerage's thesis rests on Swiggy's strategic shift from a high-growth, cash-burn model to a more cost-conscious and operationally disciplined approach. Analysts believe this pivot will drive margin expansion. Key drivers for this positive outlook include steady growth in the core food delivery business and, crucially, improving unit economics in its quick commerce arm, Instamart. Rising average order values (AOVs) and better store utilization are expected to guide Instamart toward breakeven. Similarly, Elara Capital also upgraded Swiggy to 'Buy' from 'Accumulate' with a target price of ₹425 per share.

Eternal (Zomato): Stability and Strong Execution

For Eternal, the parent of Zomato, the outlook is equally positive, albeit centered on stability and market leadership. Motilal Oswal has maintained its 'Buy' rating, revising its target price to ₹420, which suggests a 29% upside. The firm's confidence in Zomato is largely driven by the strong momentum of its quick commerce business, Blinkit, which has established a leading position in the market. Zomato's existing profitability provides a stable foundation, making it a preferred choice for investors seeking lower risk compared to Swiggy's turnaround narrative.

Quick Commerce: The Key Battleground

The quick commerce (QC) segment remains the primary focus for both companies and analysts. While competitive intensity remains high, the narrative is shifting from aggressive expansion to sustainable economics. Swiggy's Instamart is seen to be narrowing its losses, while Zomato's Blinkit is already a market leader. Analysts believe that improving AOVs, better network efficiency, and a more disciplined approach to expanding dark stores will pave the way for profitability in this segment. JM Financial, however, offered a more cautious view, warning that platform fee hikes might not directly translate into higher margins due to lower minimum order values in the QC space.

Investment Outlook: Risk vs. Reward

Investors now face a choice between two compelling but different narratives. As noted by Abhishek Pathak of Motilal Oswal, "the perfect storm of headwinds is behind us. Both players now face multiple tailwinds." Zomato offers the comfort of profitability and market leadership through Blinkit, representing a more stable investment. Swiggy, on the other hand, presents a higher potential upside if it successfully executes its turnaround strategy and achieves profitability in its Instamart division. The choice for investors may ultimately depend on their individual risk appetite.

Conclusion

The recent rally in Zomato and Swiggy shares reflects growing market confidence in the long-term viability of India's food and grocery delivery sector. Bullish brokerage reports, driven by improving unit economics and a clearer path to profitability in the critical quick commerce segment, have reignited investor interest. While challenges from competition remain, the strategic shift towards sustainable growth positions both companies for potential value creation ahead. The market will be closely watching their execution on margin improvements and profitability milestones in the upcoming quarters.