The stock of Vedanta has been on a growth spree since the end of March as the stock has seen a growth of 5.2% in less than 2 weeks!

2022 was off to a great start for the stock of Vedanta. Despite declining in the first few weeks of January, the scrip began moving upwards as bulls were very interested in the stock. Early in February 2022, the stock had been growing for 2 consecutive weeks before it reversed due to rising tensions between Ukraine and Russia.

On 24th February i.e. the day of Russia’s assault on Ukraine, Vedanta was among the countless stocks that faced selling pressures. Vedanta declined over 4% on that day! However, investors resumed their bullish expectations of Vedanta the very next day.

Strong bullish sentiment continued to take over the stock as the stock made a new lifetime high of Rs 316.60 per share, growing 34% in less than 4 months. The stock declined after that as it was range bound for a few sessions before the stock lost steam and fell into a downtrend. The stock was deemed too expensive as it fell below the Rs 300 level by the end of April.

 

Global investor sentiment had turned sour as indices all over the world had begun dropping as India was no exception. All major stocks, including Vedanta’s, were on the selling counters of FIIs as panic selling was rampant. Vedanta lost 29.3% of its value as rising inflation and dropping metal prices proved to be a bad combination for Vedanta, a mining giant.

The prices of copper and steel had declined over 20% as it was a major hit to Vedanta. The earnings of the company did not meet its mark. Investors kept selling out the stock as no relief appeared to be in sight. The extent of the selling was so bad that the stock lost the Rs 200 mark and touched a 52-week low of Rs 160.45. This meant that the stock of Vedanta had fallen a staggering 49.3% from its lifetime high in less than 3 months!!

When July began, conditions seemed to improve as the improving global outlook assisted Vedanta’s stock. The scrip began rising once again, slowly but steadily. The demand outlook was uncertain in China but inflation was soaring everywhere. Among all of that, smelters began shutting down in Europe which meant greater exports for the company.

The stock reclaimed the Rs 200 mark soon after as brokerages felt the stock was available for cheap and that there was an upside of over 20%. Moreover, a place was decided for the semiconductor chip JV between Vedanta and Foxconn, which further bolstered investor sentiment. 

As such, the stock enjoyed a steady uptrend which was complemented by the company’s announcement of dividends. The positive move continued well until January 2023 whereby the company had reclaimed the Rs 300 mark. Growing over the mark was difficult for the stock as it was range bound till mid-February 2023 after which the stock broke down once again.

The government had refused an offer by the company where it was proposing to have its subsidiary HZL buy its entire zinc business. The government, which owns around 30% of the company, was strictly against the deal as it threatened legal action against Vedanta. The stock crashed 15% in less than 2 weeks!

 

However, the stock has recently seen recovery. There was uncertainty about the company’s debt as the Adani-Hindenburg fiasco had shaken the Indian markets. However, the company announced that it had deleveraged around $2 billion and had enough liquidity, which drove investor hope in the stock.

What is the future outlook of Vedanta?

Fundamentally, the company has reported muted aluminum production for FY23 but had its highest-ever refined metal production as well as impressive growth in power sales. The deal of HZL and its Zinc assets, which the company was really pushing for to lower its debt, could not be completed and the same is a big blow to the company.

Moreover, Vedanta’s stock was recently degraded to junk as the company has around $3 billion in debt servicing according to S&P while having a debt of $7.7 billion. The company is in need of a refinancing plan urgently as it will face troubles otherwise.

 

Technically, the stock of Vedanta is trading below its 5,20, and 200-day averages but above its 50 and 100-day averages. The stock recently retested its immediate support (marked in blue) at Rs 247.60 per share from which it faced firm rejection and reversed. The stock is currently moving toward its immediate resistance (marked in yellow) at Rs 284.30 per share.

With the RSI at 57, the stock is neither overbought nor oversold. Vedanta is still one of India’s highest dividend-paying stocks (over Rs 100 paid in dividends in 2022) which makes it an attractive buy. Therefore, buying could pick up in the coming days before a major change in trend could be noticed.

Report by Jobaaj Group.