Vedanta said https://bit.ly/2TpGNrV on Thursday its foreign unit Cairn India Holdings Ltd had paid $200 million (£152.7 million) to buy a stake in Anglo American from Volcan Investments Ltd, the miner's parent company, as a part of its "cash management activities".

The miner's returns from the deal depends on Anglo American's stock price and returns are not guaranteed, Morgan Stanley said in a note.

"While there is some downside protection for Vedanta in specific scenarios (not clarified by the management), returns are not guaranteed," Morgan Stanley said.

The stock slumped as much as 19.86 percent on Friday, the largest intraday fall since October 2008. More than 74 million shares - 7.4 times its 30-day average - had changed hands by early afternoon, making it the most-heavily traded security on the NSE index.

Industry players too have speculated that Agarwal, who controls about a fifth of Anglo American, wants some form of a tie-up with the global miner.

In September last year, Vedanta Resources' Chairman Anil Agarwal's decision to take the London-listed miner private was seen by some as a prelude to a potentially broader deal with bigger miner Anglo American.

Kotak's analysts in a note said that while Vedanta stated the investment is to earn higher returns, they fail to see merit in the arrangement.

Industrial metals prices are set for their biggest annual fall in years after signs of slowing growth in China's commodities-hungry economy and a U.S.-China trade war, potentially affecting global mining firms.

Vedanta on Thursday posted a 21.1 percent decline in third-quarter profit that still beat estimates.

(This story corrects to say investment by Vedanta unit, not parent company in the first paragraph)

(Reporting by Chandini Monnappa in Bengaluru; Editing by Sudarshan Varadhan and Shreejay Sinha)

By Chandini Monnappa