Besides, the union budget document said that the import duty on aluminium will be raised to 7.5% from 5% while the export duty on low-quality iron ore fines would be scrapped. This Duty Revision on iron ore and aluminium is expected to benefit Vedanta Ltd, the most as it is a big producer of both commodities.
The iron ore duty cuts will help miners liquidate stocks at a time when international prices are low," Mines Secretary Balvinder Kumar, who proposed the revisions, told Reuters.
Iron ore fines and lumps, with ferrous content of less than 58%, were earlier charged 10% and 30% export duty respectively. The move will help Vedanta compete in the world market which is undergoing one of the worst commodity meltdowns in recent history.
The low grade iron ore, exported by Vedanta from Goa, has few takers in the country, which still relies of high quality to iron ore to produce steel. The steel industry in India still lacks technology to extract iron from low grade iron ore.
Therefore, buy the shares of Vedanta Ltd (whose valuation will increase corresponding to the rise in the valuation of Cairns India Ltd, following the rise in crude oil prices) at Rs.87.35 for short term targets of Rs.95--104. SL--Rs.83.