Vedanta’s share price has been declining for the past four sessions. Today, it opened lower for the fourth consecutive day, dropping by around 13.50% to ₹261.95 apiece on NSE.
Stock market experts attribute this to negative sentiment caused by Vedanta’s failed acquisition of state-owned Hindustan Zinc and the sharp rise in the US dollar that resulted in the depreciation of Vedanta bond yields to junk levels.
As a result, experts predict that Vedanta’s stock may continue to decline, with support now placed at ₹240 to ₹230.
Saurabh Jain, Vice President of Research at SMC Global Securities, explained that the Indian government’s opposition to Vedanta’s offer to acquire a government stake in Hindustan Zinc Ltd for $2.98 billion has negatively impacted the market mood towards Vedanta.
Additionally, Vedanta’s bond yield has depreciated by more than 30%, which has led to the bonds being categorized as junk.
This has created a repayment crisis for the company in the global markets.
Jain added that Vedanta is facing a debt repayment challenge, with $1.2 billion due by H2FY23, $4.1 billion due by FY24, $3.9 billion due by FY25, and $4.7 billion due by FY26.
Anuj Gupta, Vice President of Research at IIFL Securities, explained that the steep rise in the US dollar rate in the forex market has caused Vedanta’s bond yield to decrease.
As a result, Gupta predicts that Vedanta’s share price may continue to decline, possibly dropping to the ₹240 to ₹230 range.
He advises investors to maintain a stop loss below ₹230, while new investors are advised to consider other metal stocks such as Tata Steel or JSW Steel.
Gupta also mentioned that as of December 31, 2022, 99.99% of promoters’ shares in Vedanta had been pledged.
This is a significant challenge for the company to generate additional funds to meet its financial requirements shortly.
Hindustan Zinc’s share price has also fallen by over 2.50% in early morning deals on Tuesday and has slipped more than 6% in the last two trading sessions.