Vedanta breaks out of past lag fuelled by rally in base metals

Even though some profit-taking is expected in the near term, the current patterns show that the stock is likely to notch up further gains over the next 6-12 months, with technical analysts seeing a rise to ₹460-480 levels.

On Thursday, the stock ended at ₹388.50 on the NSE, up nearly 3% from the previous close. The shares have ended in the green in 10 out of 12 trading sessions this month and are currently at their highest level in nearly two years.

"The stock has not moved much in the last three years, and this massive underperformance is also leading to the current sharp gains in the shares," said Sudeep Shah, head of technical and derivatives research at SBICAP Securities.

The shares can be accumulated in the range of ₹350-380 for a target of ₹470-480 over a 9-12 month period, he said. Shah advises maintaining a stop loss of ₹330.

Between April 2021 and March 2024, has risen by around 19%, underperforming the Nifty Metal index, which more than doubled in the same period.

Institutional ownership also saw a dip during this period, with foreign portfolio investors cutting their stakes in the company to 8.78% as of March 2024, nearly half of 16.27% in March 2021. Mutual funds also trimmed their stake to 3.55% from 3.94% in the same period.

Agencies

Concerns of massive debt at parent Vedanta Resources, and Vedanta making hefty dividend payouts to support its parent have been among the key reasons weighing on the stock.

Analysts have, however, turned positive on the stock for now with concerns of debt obligations at bay for the time being, Vedanta completing capacity expansions for several of its verticals, and managing to bring down production costs for its key aluminium and zinc businesses.

CLSA recently upgraded the stock to 'buy' from 'underperform' earlier, raising the target price for its shares by 50% to ₹390. The company's management has also guided for debt at the parent entity being cut by $3 billion, and ramping up operating profits at a group level.

"FY25 should be the transformational year for Vedanta with debt likely peaking out, expansion of aluminium and zinc international slated for completion and value unlocking happening on the back of demerger and listing of all business verticals," Nuvama Institutional Equities said in a recent note, rating the stock a 'buy' for a target price of ₹394.

"Vedanta has seen a breakout above ₹290 levels, and could test ₹415 in the near term," said Shiju Koothupalakkal, technical analyst at Prabhudas Lilladher. He sees the shares rising to ₹460 in six months, and near-term support at ₹360.