The shares of Vodafone Idea have recorded sharp gains, jumping 30% in one month and more than 50% in four months, with analysts suggesting what investors should do now.
The shares of the telecom company were boosted by multiple tailwinds recently. In the beginning of May, the Department of Telecommunications (DoT) reduced the telco’s adjusted gross revenue (AGR) dues by 27% to Rs 64,046 crore as of December 31, resulting in bullish calls for the stock.
Later, the stock jumped after the company named billionaire industrialist Kumar Mangalam Birla as its non-executive chairman, around five years after he resigned from the same role in the telecom giant amid financial stress.
But the sharpest gains were recorded on Monday when the stock rallied over 8% to a four month high level of Rs 12.43 apiece after Bloomberg reported that UK-based Vodafone Plc, which owns a 19% stake in Vodafone Idea, is considering transferring part of its shareholding to the company itself for the Indian telco to hold in its treasury.
The stock declined 1% on Tuesday after the company clarified that it has not yet received any communication related to this from the Vodafone Group. However, the stock has gained over 11% in one week.
Should you buy Vodafone Idea shares?
The recent relief by DoT to reduce AGR dues by 27% and significant relief in payment structure augurs well from the balance sheet and cash flow perspective, said Sunny Agrawal, Head - Fundamental Research at SBI Securities, who added that this will help Vodafone Idea to mobilise additional growth capital in the form of debt. Moreover, appointment of KM Birla as Chairman is also sentimentally positive, he further said.
This shows that Vi is now moving towards growth and shedding narrative of the scepticism of survival, according to the analyst. “From a investors standpoint, investment in Vi is the play on turnaround story and those with high risk high return appetite can invest in the stock from a medium to long term perspective. Risk averse investors can stick to Bharti Airtel instead,” Agrawal said. He cautioned that Reliance’s Jio is planning full fresh issue of shares, which increases the likelihood of intense competition in the industry.
Harshal Dasani, Business Head at INVasset PMS, pointed out that the risk-reward is no longer as comfortable for fresh aggressive buying, after the sharp rally. "At current levels, investors should wait for consolidation rather than chase the rally…For traders, the stock remains a high-beta opportunity; for investors, clarity on debt funding, subscriber stability and capex execution is still critical. Fresh entry should ideally be considered only on dips or after a confirmed breakout," according to the analyst.
Technical view on Vodafone Idea share priceVodafone Idea has witnessed a sharp rally in recent sessions and is currently trading significantly above its 21-day and 50-day DEMA, indicating strong short-term momentum, highlighted Jigar S. Patel, Senior Manager of Equity Technical Research at Anand Rathi Share and Stock Brokers.
“As the stock has already seen a strong upside move, risk-reward at current levels appears less favourable for fresh aggressive buying. Therefore, traders holding long positions may consider partial profit booking at higher levels and wait for either consolidation or a healthier retracement before considering fresh entries,” he said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
