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The last quarter has seen Vedanta stuck in a range between 937p-787p. The last couple of trading days has once again seen the price move to the top of that range, and correlated with the relative strength index, inferring an overbought stance.
Asian markets have raised their expectations that China will embark on some sort of stimulus package which should help drive demand higher. Although this expectation has helped equities, it has not had a similarly positive impact on commodities.
Though it is currently difficult to quantify, the announcement that Zambia’s government has rubber-stamped a 28.8% increase in electricity charges for miners will have a knock-on effect to the company’s three mines in the country.
Expectations for Vedanta’s fourth-quarter figures, expected on 10 April, are that earnings per share will fall to 0.426. The company’s operating profit is expected to fall from $2.81 billion down to $2.20 billion, with a pre-tax profit dropping to $1.32 billion.
In the run up to these figures, the shares look to be drifting back down to the bottom end of the range. A retest of the 800p level could be seen as we await improvements in demand. Only a close above the three-month high of 937p would cause us to re-evaluate the trade.