Vedanta shares slip 38% from 52-week high; what lies ahead?

Shares of metal and mining major Vedanta Ltd have plunged 38% from their 52-week high. In the current fiscal, the stock has lost 32% and fallen 11% in 2023.  On the last day of this fiscal, the Vedanta stock closed 2.52% lower at Rs 274.70 against the previous close of Rs 281.80 on BSE. The stock fell after three sessions of gains today. Earlier, the stock opened marginally higher at Rs 284.50 on BSE. It touched an intraday low of Rs 273, falling 3.12% on BSE.
The volume of shares traded today was very large, signaling some large deals taking place on the Vedanta counter. Total 382.54 lakh shares of the firm changed hands amounting to a turnover of Rs 1085.41 crore on BSE. Market cap of the firm fell to Rs 1.02 lakh crore.

In terms of technicals, the relative strength index (RSI) of Vedanta stands at 47.1, signaling neither the stock is overbought nor oversold. The stock has a one-year beta of 1.5, indicating very high volatility during the period. Vedanta shares are trading higher than the 5 day moving averages but lower than 20 day, 50 day, 100 day and 200 day moving averages.

The PE ratio of Vedanta stands at 7 signaling the stock is undervalued compared to its industry. The PE of the mining industry stands at 14.39.

At the current level, Vedanta shares are trading 37.74% lower to the 52 week high of Rs 440.75 hit on April 11, 2022. The stock hit a 52 week low of Rs 206.10 on July 1, 2022.

Meanwhile, credit ratings firm Crisil Ratings has downgraded the outlook for Vedanta to 'negative' from 'stable' earlier as higher cash outflow from the company in the form of dividends is seen negatively affecting the financial leverage and flexibility of the resources conglomerate.

A credible refinancing or repayment plan for debt obligations in the second half of FY24 will be a key monitorable for Vedanta Resources, as it faces significant refinancing risk till FY25, the rating agency said. Vedanta Resources is rated 'B-/Stable' by Crisil.

"In case of any further delay in the expected refinancing plan, dependence on dividend payouts by Vedanta Limited will increase; Vedanta Limited has cash balances only to cover for VRL's maturities for the first half of fiscal 2024, and hence will be a key rating sensitivity factor," it said in a report on Wednesday.

Here's a look at what analysts  and brokerages said in the outlook for the stock.

Abhijeet from Tips2trade said, "Vedanta is in a sideways trend with strong resistance at Rs 295 on the daily charts. A close below support of Rs 282 could lead to a target of Rs 260 in the near term."

Vaishali Parekh, Vice President - Technical Research, Prabhudas Lilladher said,"The stock has been moving within a range for quite some time between Rs 265 and Rs 288 zone finding tough resistance near the 200DMA zone, which needs to be crossed decisively to carry on the momentum further ahead. Once the breakout is confirmed, then one can expect for further upward move till Rs 310-315 levels as the next target zone. On the downside, the support near Rs 265 is crucial and a decisive breach below would weaken the trend and expect for further fresh slide with next major support visible near Rs 255-252 zone."

Rohan Shah, Head Technical Analyst at Stoxbox sees Vedanta hitting target of Rs 340.

"Vedanta's price action suggests the stock is trading in Stage 3 of the distribution phase. The recent sideways trend incepted on February 28 has come on relatively higher volumes, with shorter-term EMAs acting as an overhead resistance. The initial long opportunity can come on price action crossing above Rs 295 while a positive trajectory is anticipated on a close above Rs 340 level."

Nuvama Wealth Management refers Vedanta as its top pick in the aluminium space. It has projected a target price of Rs 428 per share for the stock. The brokerage anticipates a rise in aluminium prices from the present levels of US$2,227 per tonne, which are down 34% from a year ago and 5% month-on-month (MoM).

As summer approaches in China, output will presumably slow down, and downstream demand is anticipated to improve in China, which would help prices of aluminium to rise from their current levels. For FY24 and FY25, the brokerage expects the average price of aluminium to be US$2,500 per tonne.

"We believe the China production to decline with the onset of summer. This, coupled with increasing Chinese domestic demand, should increase from current market price (CMP) of US$2,227/tonne," said the brokerage in its report.

Vedanta is a subsidiary of Vedanta Resources Ltd, which has major operations in oil and gas, zinc, lead, silver, copper, iron ore, steel, aluminium ,and power in India, South Africa, Namibia, and Australia.

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