Why has Zomato rallied so sharply in the last few sessions?

Zomato has rallied more than 20% in just about 3 treading sessions. The trigger came from the recent announcement by MSCI about the inclusion of Zomato in the MSCI India index. This is likely to result in a rush of passive money flows into the Zomato stock. Most passive investors like index funds and index ETFs buy stocks linked to the index weight.

Therefore, such ETFs and index funds are likely to trigger buying in Zomato stock as part of portfolio rebalancing. The overall flow across 7 stocks is estimated at $1.4 billion. Zomato focused more on revenue growth than profits and that has gone down well with the analysts and investors. Current price targets for Zomato range from Rs.180 to Rs.220.