Vedanta Shares Decline 5% Following Demerger Announcement, Raising Questions on Strategic Reset and Value Investment Potential

Vedanta Demerger: Stock Faces Selling Pressure Ahead of Record Date

Vedanta, a leading metal and mining major, is set to undergo a demerger into five separate entities this week. The effective and record date for the demerger has been fixed at 1 May, with shareholders to receive shares in a 1:1 ratio for each demerged entity.

The demerger involves the separation of Vedanta's aluminium, merchant power, oil and gas, and iron ore verticals into separate listed entities. Despite the anticipation of the demerger, Vedanta's stock has seen a sharp decline of over 5% since the record date was announced on 20 April.

According to experts, the decline is a classic case of post-event profit-booking. Vedanta, which has seen a surge in its stock price of almost 80% in a year, has already delivered strong returns over the last six months. The stock has recently climbed to the 790-800 level, with a strong underlying price trend in the commodities it deals with and the demerger news being a major contributor to its rally.

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As per Sunny Agrawal, Head of Fundamental Research at SBI Securities, the potential upside post-demerger is now limited, which likely explains the profit booking observed after the announcement of the record date. Khushi Mistry, Research Analyst at Bonanza, echoed similar views, stating that investors are taking profits in Vedanta shares off the table, with optimism already priced in.

Investors are also de-risking ahead of the 30 April special pre-open price-discovery session, where Vedanta will trade ex-demerger and the share price will mechanically drop as the four spun-off entities' value is stripped out. The shares of Vedanta will open on 30 April, and one can expect a sharp fall due to the exclusion of the spun-off entities. However, Mistry advises investors not to panic-sell, as their portfolio will adjust to normal once the other four entities are listed.

For those looking to buy Vedanta shares to play the demerger move, Agrawal believes buying would be ideal as long-term trend is positive. He suggests buying now, keeping in mind that the fair value based on SOTP is around ₹900.

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Technically, Vedanta stock has faced rejection near its recent swing high and is now entering a phase of short-term consolidation, said Hitesh Tailor, Technical Research Analyst at Choice Broking. The stock is comfortably trading above its 100-day and 200-day EMA, highlighting a strong broader structure and sustained bullish momentum on the higher timeframe.

Immediate resistance is seen near ₹780-₹800, and a decisive breakout above this zone can trigger fresh upside momentum, opening the door for a move towards ₹840-₹875, supported by Fibonacci extension levels.