Vedanta shares drop 26% in two months, erase all post-demerger gains. Time to buy or better to avoid?

While the newly demerged Vedanta stocks grab the headlines with sharp upswings and downswings, the shares of the metals major Vedanta quietly fell more than 26% from its post-adjustment high in just two months, with analysts still advising caution.The shares of the company adjusted nearly 63% at the end of April this year, as it began to trade excluding the value of Vedanta Aluminium, Vedanta Power, Vedanta Oil & Gas, and Vedanta Steel & Iron Ore units.

The stock adjusted to the mega demerger that marked one of the biggest corporate restructurings in India’s metals and mining space.After the demerger adjustment, the stock jumped over 24% in less than a month to hit a post-demerger high of Rs 360 apiece at the end of May.

However, what followed was a consistent trend of decline, falling 26% to close at Rs 264.95 apiece on Tuesday.

The stock has now erased all its post-demerger gains, and trades below the price at which it opened following the adjustment.

At the same time, Nifty Metal crashed over 9% amid an overall downtrend in metal stocks.Meanwhile, the four new stocks that debuted on the stock market following the demerger saw sharp upswings and downswings.

Vedanta Iron and Steel has emerged as the winner in terms of gains, rising over 55% in 2026 so far.

The restructured Vedanta meanwhile continues to house the zinc and silver businesses through Hindustan Zinc and is envisaged as an incubator for future ventures.Recently, CRISIL upgraded Vedanta's long-term rating to CRISIL AA+/Stable from CRISIL AA/Watch Developing and reaffirmed its short-term rating at CRISIL A1+.

It also assigned a CRISIL AA+ rating with a Stable outlook to the company's non-convertible debentures.The ratings agency also said Vedanta's financial risk profile has improved significantly due to the continued consolidation of Hindustan Zinc and the allocation of debt to the demerged entities.

It added that lower leverage, sustained earnings and cash flows from HZL, along with the market value of Vedanta's investment in HZL, have strengthened the company's financial flexibility.

Over the medium term, the expected ramp-up in Zinc International and improving contributions from the copper and ferro alloys businesses are expected to support earnings.Also read | Vedanta, demerged Vedanta Aluminium, Vedanta Oil & Gas get rating upgrades from CRISILIs it time to buy Vedanta shares?The sharp drop in Vedanta’s share price has come on the back of an improving operating backdrop, not a deteriorating one, said Harshal Dasani, Business Head at INVasset PMS.

Hindustan Zinc earlier this month reported its highest-ever first-quarter mined metal production of 268 kilotonnes, the fifth consecutive year of Q1 records, with saleable metal up 4%.

The company’s consistent tradition of dividend payouts for investors confirms the cash upstreaming engine is running, Dasani added.

In this background, the analyst feels that the correction in Vedanta’s share price reflects profit-booking after the post-listing euphoria across the demerged family, holders rotating into the growth entities they actually wanted, and the permanent holding-company discount that reflects the parent's dividend dependence.

Investors will now look at Hindustan Zinc’s Q1 earnings print scheduled on July 24 as the next catalyst for Vedanta shares, and the medium-term zinc surplus from China remains the structural cap on realisations into 2027, the analyst said.

“The framework favours staggered accumulation for income-oriented investors comfortable with commodity concentration, with the dividend stream providing genuine support at the corrected price, and the discipline that this is a metals-cycle position carrying a permanent holding company discount, not a diversified holding.

Investors seeking the growth engines should own the demerged entities directly,” he added.Technical view on VedantaThe technical charts of Vedanta, however, warrant caution.

Vedanta shares have witnessed a pullback from their 200-day EMA, but the stock continues to trade below its key moving averages and has yet to negate the lower high–lower low structure on the daily chart, keeping the broader trend bearish, said Sudeep Shah, Head of Technical and Derivatives Research by SBI Securities.The MACD remains well below the zero line, reinforcing the prevailing negative momentum, he explained, adding that the stock has retraced more than 78.6% of its prior rally from Rs 238 to 360, suggesting that it is still premature to classify the recent pullback as a trend reversal.“The Rs 250–245 zone is likely to provide immediate support.

A decisive breach below this range could trigger another leg of downside.

On the upside, the Rs 275–280 zone, which coincides with the 100-day EMA, is expected to act as the immediate resistance,” Shah said.Also read |Have metal stocks’ dependence moved from Chinese apartments to world's power grid?

5 metal stocks with upside potential of up to 34%(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own.

These do not represent the views of The Economic Times) ...