Vodafone Idea stock formed a risky pattern ahead of its share sale

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on Apr 16, 2024
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  • Vodafone Idea’s stock price is in a deep bear market.
  • It formed a double-top pattern on the daily chart.
  • The company will have a share sale starting on Thursday.

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Vodafone Idea’s (NSE: IDEA) share price formed a dangerous pattern as investors shifted their focus to the upcoming share sale. It formed a double-top pattern at ₹18.40 on January 1st and February 23rd of this year. It was trading at ₹13 on Tuesday, almost 30% below its highest point this year.

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Vodafone Idea share sale ahead

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Vodafone Idea, a giant Indian company mostly owned by the government, Vodafone Group, and Aditya Birla, is preparing for a big week as it launches a major share sale.

The company is working to raise capital in a bid to boost its investment in the highly competitive Indian telecommunication market.

There are signs that the share sale will go on well after a report said that GQG was considering making a $400 million investment in the company. That is an important event and a sign of confidence in the company.

GQG is a major investment company that was started by Rajiv Jain who has made investments worth over $10 billion in the Indian market. Some of his investments are in top blue chip companies like ITC, ICICI Bank, State Bank of India, and Adani Enterprises.

Vodafone Idea’s share sale will start on April 18th and run until April 22nd. It will give retail and institutional investors a chance to invest in the third telecommunication company in the country.

The firm intends to use these funds to reduce its debt and invest in 5G and 4G in the country. $600 million will be used for the 4G rollout while $1.52 billion will move to the 4G plan. Analysts believe that it is focusing on the 4G segment as it seeks to improve the average revenue per user (ARPU).

Its 4G expansion is notable because it is cheaper and that it will be a big improvement for most of its subscribers who still use 2G. The most recent results showed that its ARPU increased from 135 Rs in Q3’23 to 145 Rs in Q3’24. 

Still, it is unclear whether these investments will solve the company’s key problems. It is competing with Jio and Bharti Airtel, two companies that have gained market share in the past few years. Vodafone Idea has continued losing subscribers to the two companies.

Playing in its favour is the fact that the Indian government owns over 30% of the company. And recently, Modi’s administration has insisted that it will not allow the crucial telecommunication sector to become a duopoly.

Nonetheless, Vodafone Idea still faces major challenges. For example, it has never reported a full-year profit since 2016 as challenges mounted. It also has over $23 billion in debt.

Vodafone Idea share price forecast

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Vodafone Idea

Turning to the daily chart, the Vodafone Idea stock price formed a double-top pattern at ₹18.40 in January and February. In price action analysis, this pattern is one of the most bearish signs in the market.

The shares have now retreated below the crucial support level at ₹13.60, its lowest swing on February 6th and the neckline of the double-top pattern. It has also moved below the 50-day Exponential Moving Average (EMA).

Vodafone Idea’s stock price sits slightly above the 200-day Exponential Moving Average (EMA). It is also below the 38.2% Fibonacci Retracement level. Therefore, the outlook for the stock is bearish, with the next point to watch being the 50% retracement point at ₹12.05.

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