Vedanta shares rise 77% in two months, overbought on charts; is the upside capped?

Shares of Vedanta have climbed 77% in the last two months.  The stock has risen 16% since Q4 earnings were announced on April 25 this year. The metal and mining stock, which closed at Rs 251.85 on March 13 ended at Rs 433.15 on BSE in the previous session. The stock ended near the 52 week high of Rs 438.5 reached on May 14.

The stock fell to a 52 week low of Rs 207.85 on September 28, 2023.

In the previous session, Vedanta shares ended 4.64% higher at Rs 433.15 on BSE. Market cap of the firm stood at Rs 1.61 lakh crore. The rally in the stock came after the mining conglomerate said it would convene a board meeting on May 16 to deliberate on various fundraising strategies, including the issuance of equity shares or other convertible securities. The meeting will also address the possibility of declaring a first interim dividend for the financial year 2024-25.

On Wednesday, the stock hit a fresh 52 week high of Rs 445.50. A total of 2.43 lakh shares of the firm changed hands amounting to a turnover of Rs 10.66 crore on BSE. Vedanta shares have a one-year beta of 0.8, indicating low volatility during the period. 

In terms of technicals, the relative strength index (RSI) of Vedanta stands at 72.7, signaling the stock is trading in the overbought territory. Vedanta shares stand higher than the 10 day, 20 day, 30 day, 50 day, 100 day, 150 day and 200 day moving averages. 

Nuvama revised upward its target price to Rs 542 from Rs 394 earlier post Q4 earnings. The brokerage retained its ‘Buy' call on the stock.

"We are jacking up Vedanta's FY25/26 Ebitda estimates by 18 per cent/23 per cent factoring in higher commodity prices and lower CoP in aluminium. We believe the company’s debt peaked out in FY24. The aforesaid upward earnings revision lifts the target price to Rs 542 (earlier Rs 394); reiterate ‘BUY’," Nuvama said.

Abhijeet from Tips2trades said, "Vedanta stock price is  bullish but also very overbought on the Daily charts with next resistance at Rs 469. Investors should keep booking profits as Daily close below support of Rs 415 could lead to a fall till Rs 371 in the near term."

Centrum Broking has a price target of Rs 438 on the Vedanta stock, which it achieved in the last session.

"We maintain our FY25/FY26 DPS estimate of Rs45/share (12% dividend yield), as VEDL intends to reduce leverage of the parent company, Vedanta Resources (VRL). Our equity target price is revised higher to Rs438 (earlier Rs273), based on FY26E SoTP. At CMP, we see upside of 15% and revise rating to BUY (earlier: ADD)," said Centrum.

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