Vedanta Limited Stock Crash: Stock crashes badly, hits lower circuit with a fall of 14%:The stock once again saw a decline and hit a lower circuit. The stock is currently down over 13%.

News Topical, Digital Desk : Vedanta Limited Stock Crash Shares of Vedanta Limited fell by nearly 10% during trading on Sunday, February 1. This decline was an extension of the sell-off that began on Friday and was in line with weakness in other metal sector stocks. However, as the day progressed, the stock saw a sharp recovery and recovered by about 7% from its lows. After that, the stock once again saw a decline and hit the lower circuit. Currently, the stock is down by more than 13%. At the day's low, Vedanta's market cap had declined by nearly ₹54,000 crore in the previous two sessions.

What was the main reason for the decline?

The initial pressure was driven by widespread selling in the metals sector, particularly a sharp decline in Vedanta's subsidiary, Hindustan Zinc Ltd. Shares of Hindustan Zinc plunged 18% on Sunday, impacting parent Vedanta. However, silver does not contribute significantly to Vedanta's overall business in terms of Sum of the Total Parts (SOTP). Its subsidiary, Hindustan Zinc, has the main exposure to silver, while Vedanta primarily positions itself as an aluminum player. Currently, the price of aluminium on LME is around $3,117 per tonne and the price of silver is around $78 per ounce, which are still above the estimated levels ($2,850–3,100 per tonne of aluminium and $55–60 per ounce of silver). According to brokerage Nuvama, the contribution of aluminium to Vedanta's FY28 EBITDA mix is 52%, zinc 20%, silver 12%, power 6% and oil & gas 7%. This means the overall contribution of silver is limited. For the company, demerger plan, volume growth, cost reduction and attractive dividend policy are the factors supporting the stock.

Recovery seen in gold and silver too Meanwhile, on the Multi Commodity Exchange of India (MCX) at around 10 am on Sunday, gold was seen trading above ₹1.40 lakh per 10 grams and silver above ₹2.70 lakh per kg. However, both the metals had opened with a decline of around 6% and the decline reached 9% during the trading.

Impact on other metal stocks Apart from Vedanta's subsidiary Hindustan Zinc, the shares of Hindustan Copper Ltd. also fell by around 10% on Sunday. After the recent OFS, Vedanta has 60.7% stake in Hindustan Zinc.

Impact of global commodity crash This sharp decline was seen when gold and silver suffered record decline in the global markets on Friday. After the closure of Indian markets, selling intensified in the global markets overnight. Silver prices fell by 37% intraday on Friday, while gold fell by 12% in the spot market, which is considered to be the biggest single-day fall since the early 1980s. This is expected to impact ETFs as well, which have already seen a decline of 15–20% on Friday.

Q3 results provided support . Last week, Vedanta announced its third quarter results, which were strong on a year-on-year basis.

Net profit up 60.1% to ₹5,710 crore
Other income increased from ₹339 crore to ₹492 crore
Revenue up 19% to ₹45,899 crore
EBITDA up 37% to ₹6,866 crore, margin at 29.4%

The company's aluminum business reported EBITDA of ₹7,023 crore, which was better than Street estimates (₹6,821 crore). However, due to hedged quantities, the full benefit of higher prices was not realized.