Vedanta may correct 6% this series

MUMBAI: The Vedanta stock, which has been under pressure since the past month, could potentially decline 6 per cent to Rs 237-238 after news emerged post market closure Monday of the government shuttering its copper smelter in Tuticorin, near month derivatives data indicates. If this support breaks, the stock could have a shy at 230 levels.

Vedanta options expiring May 31 show that put sellers have sold maximum contracts – 918 (1,750 shares equal one contract) — at the 240 strike. Bloomberg data shows the volume weighted average price for this put since May 1 is Rs 2.54. This means that put sellers’ breakeven below which they begin to face losses is Rs 237.46.

“Below Rs 237-238, put sellers could either begin buying back their puts or shorting the futures which could see the stock possibly correct towards Rs 230 in this series,” said Hemant Nahata, derivatives analyst, IIFL Wealth.


Agrees Chandan Taparia, technical analyst at Motilal Oswal Securities. “So far, we have seen selling of far more call options than puts this series, which indicates traders were not anticipating much upside in the stock. However, now the probability of short covering of puts or shorting of Vedanta futures increases so the correction could potentially intensify.”

The Vedanta share has corrected almost 19 per cent since April 19 to date. In the current series the put call ratio is 0.42, implying that for every 100 calls sold, traders have sold just 42 puts.