Metal index plunges 2%: Viceroy Research's report on Vedanta Resources among key factors behind bearish movement

Mumbai, July 9, 2025 — The Nifty Metal Index plunged nearly 2% in Tuesday’s trading session, underperforming broader benchmarks, as investor sentiment soured following the release of a scathing report by forensic financial research firm Viceroy Research targeting Vedanta Resources. The report has reignited concerns about corporate governance and debt sustainability within the Anil Agarwal-led conglomerate, prompting a ripple effect across the metals space.

Vedanta Ltd, a key constituent of the index, led the decline, falling over 6% intraday before closing down 5.3%. Other metal majors including Hindustan Zinc, JSW Steel, and Tata Steel also saw notable corrections as the market responded with caution.

Viceroy Research Flags Governance & Debt Issues

Viceroy Research, known for its investigative deep dives into global corporations, released a 30-page report alleging opaque financial dealings, excessive related-party transactions, and rising liquidity stress at Vedanta Resources, the UK-based parent of Vedanta Ltd.

The report questioned the sustainability of Vedanta Resources’ debt repayment model, citing frequent pledging of shares, asset sales, and complex inter-company structures. It also pointed to the recent fundraising efforts through bond issuances as a red flag, characterizing them as stopgap measures rather than long-term solutions.

“Vedanta is walking a tightrope with its liquidity profile. Any shock to commodity prices or access to credit markets could destabilize its entire operating structure,” the report noted.

Market Reacts With Swift Risk-Off Sentiment

The fallout was swift. Vedanta Ltd's stock was inundated with selling pressure as brokerage houses and institutional investors reacted to the revelations. The broader metal index, heavily weighted with interlinked mining and steel companies, bore the brunt.

By closing bell, the Nifty Metal Index had shed nearly 2.1%, marking its steepest one-day loss in over two months.

“While Vedanta has long carried a reputation of aggressive financial engineering, this report reignites underlying investor fears, especially amid a volatile global commodities environment,” said Nilesh Shah, Head of Equities at Envision Capital.

He added, “Metal stocks are inherently cyclical, and such negative corporate news tends to have an amplified effect during macro uncertainty.”

Global Metal Prices Add to Pressure

In addition to the Vedanta-led selloff, global commodity trends contributed to the negative sentiment. Prices of key industrial metals like copper, aluminum, and zinc fell 1.5% to 2.3% on the London Metal Exchange (LME), amid weak demand signals from China and a stronger US dollar.

“China’s post-COVID recovery has hit significant roadblocks, and any indication of slower infrastructure spending tends to drag down base metal prices,” said Rahul Gupta, Senior Commodity Analyst at Emkay Global.

The dollar index, which touched a one-month high, also weighed on commodity-linked equities as it makes dollar-denominated metals more expensive for international buyers.

Vedanta Group’s Response and Market Position

Vedanta Ltd has yet to issue a formal response to the Viceroy report. However, sources close to the company indicated that the management may hold a press briefing later this week to address investor concerns.

Vedanta Resources, which recently refinanced a portion of its $2 billion bond repayments due in 2025 and 2026, is already under scrutiny by rating agencies. Fitch and Moody’s have both highlighted the company’s thin liquidity buffer and high refinancing risk.

“While the group has made progress in deleveraging at the operational level, the debt at the holding company remains a persistent overhang,” said a recent Fitch Ratings note.

Investor Outlook: Caution Ahead

The steep drop in metal stocks has raised red flags for retail and institutional investors alike. Despite strong fundamentals in certain segments, the sector faces multiple headwinds — governance issues, macro volatility, and weak global cues.

“Investors should remain cautious in the near term. While the long-term structural story for Indian metal producers remains intact, corporate transparency and global demand revival are key variables,” advised Kavita Rawat, Portfolio Manager at Axis Securities.

Analysts recommend a stock-specific approach going forward, emphasizing fundamentally sound companies with clean balance sheets and strong operational performance.

The metal index’s 2% plunge serves as a stark reminder of how corporate governance and macroeconomic uncertainty can converge to trigger sector-wide corrections. While Vedanta Resources remains at the center of the storm, the broader metals space will likely remain volatile in the coming weeks as investors reassess risks and await clarity on debt resolution and demand trends.