The sell-off in Zomato shares has triggered a broad-based market rout for e-commerce players, including Swiggy, Nykaa, D-Mart, FirstCry, and Trent. The sharp correction in these stocks—although D-Mart remained relatively insulated—followed a weak quarterly earnings report by Zomato, which raised concerns about intensifying competition in the sector.

Zomato shares have fallen as much as 18% over three sessions this week after reporting a sharp drop in Q3 FY25 profit, largely due to aggressive investment in its loss-making quick commerce arm, Blinkit. The slowdown in the food delivery segment, coupled with heightened competition and higher customer acquisition costs, has further pressured margins.

What fuelled the sell-off in e-commerce stocks?

Zomato’s lower-than-expected Q3 profitability dampened investor sentiment for e-commerce stocks, sparking a sell-off across the sector. Zomato's closest rival, Swiggy, has seen its share price fall nearly 12% in just two days, while FSN E-Commerce Ventures, the parent company of Nykaa, has faced a similar 12% correction over four consecutive sessions. Similarly, shares of Brainbees Solutions, the owner of FirstCry, have tumbled over 13% in the last four trading days, and Trent shares have lost over 10% in three sessions. D-Mart has experienced a comparatively marginal correction of just over 1% during this period.

Exchange data shows Zomato shares have corrected 33% from their 52-week highs, while Swiggy’s stock price is down 31.5% from its record high. Nykaa shares have dropped 29% from their 52-week peak, and FirstCry shares have plunged 69% from their all-time highs. Meanwhile, D-Mart and Trent shares are also down 35% each from their respective 52-week highs.

Short-term pain for e-commerce players

Market experts believe the e-commerce sector may face short-term challenges due to rising costs and competitive pressures, but the long-term growth outlook remains positive. A recent report by InCred Equities stated that “impulsive corrections” are likely for e-commerce food tech stocks due to their steep valuations, but such corrections could present opportunities to accumulate resilient performers.

“The Indian quick commerce (QC) market, expected to grow at a 60-80% CAGR between CY23 and CY28, is well-positioned to accommodate rising competitive intensity. Companies focusing on convenience, customer experience, and speed of delivery are creating hyperlocal, high-frequency demand,” the report noted.

The early-mover advantage, better control over unit economics, and sufficient funding suggest that both Zomato and Swiggy are well-placed to capture incremental growth in the food delivery business. As for quick commerce, the potential market opportunity is vast enough to absorb the increasing competitive intensity.

The brokerage house has initiated coverage of the e-commerce food tech sector with a positive outlook, assigning an ‘ADD’ rating to both Zomato and Swiggy. However, it views Zomato more favourably, citing its stronger unit economics as a key advantage in capturing incremental market share amid favourable industry dynamics. “Zomato’s control over unit economics could prove to be a winning formula in an evolving and competitive landscape,” the report concluded.

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