Nazara Technologies Ltd Upgraded to Hold by MarketsMOJO on Technical and Financial Improvements

Technical Trends Shift to Mildly Bullish

The primary catalyst for the rating upgrade is the positive shift in Nazara’s technical grade, which moved from a sideways trend to a mildly bullish stance. Weekly technical indicators such as the Moving Average Convergence Divergence (MACD) and the Know Sure Thing (KST) oscillator have turned mildly bullish, suggesting growing upward momentum in the stock price. Additionally, Bollinger Bands on both weekly and monthly charts indicate bullish signals, reinforcing the technical strength.

However, some caution remains as the monthly MACD and Dow Theory indicators still show mildly bearish tendencies, and the daily moving averages are mildly bearish. The Relative Strength Index (RSI) on both weekly and monthly timeframes remains neutral, providing no clear overbought or oversold signals. On balance, the technical outlook has improved sufficiently to warrant a more positive rating, but investors should remain vigilant for any reversals.

Financial Performance: Exceptional Growth in Recent Quarters

Nazara Technologies has delivered very positive financial results in the second quarter of FY25-26, which have been instrumental in supporting the upgrade. The company reported an extraordinary 834.85% growth in operating profit for the quarter ended September 2025, a remarkable turnaround from previous periods. Net sales for the nine months reached ₹1,545.43 crores, reflecting an 85.03% increase year-on-year, while profit after tax (PAT) surged to ₹954.67 crores.

Return on Capital Employed (ROCE) for the half-year stood at an impressive 26.42%, indicating efficient utilisation of capital and strong profitability. The company has also reported positive results for two consecutive quarters, signalling sustained operational improvement. Furthermore, Nazara maintains a low debt-to-equity ratio, averaging zero, which reduces financial risk and enhances balance sheet strength.

Valuation and Market Performance

Despite the recent strong performance, Nazara’s valuation remains cautious, reflected in its current Mojo Score of 58.0 and a Mojo Grade of Hold, upgraded from Sell. The company’s market capitalisation grade is rated 3, indicating a mid-cap status with moderate liquidity and market presence. The stock price closed at ₹288.00 on 6 January 2026, up 1.00% from the previous close of ₹285.15, with intraday highs reaching ₹294.85.

Over the past year, Nazara has delivered a 13.05% return, outperforming the BSE Sensex’s 7.85% gain. The stock’s one-month return is particularly strong at 19.4%, compared to a slight decline of 0.32% in the Sensex. Over three years, the stock has generated a cumulative return of 96.75%, significantly outpacing the Sensex’s 41.57% over the same period. This consistent outperformance underscores the company’s resilience and growth potential within the Media & Entertainment sector.

Long-Term Financial Trends and Risks

While recent quarters have been encouraging, Nazara’s long-term financial growth presents a mixed picture. Operating profit has declined at an annualised rate of 176.29% over the past five years, indicating volatility and challenges in sustaining profitability. The company’s PEG ratio stands at zero, reflecting rapid profit growth relative to price but also signalling potential valuation risks.

Another concern is the high level of promoter share pledging, which has increased by 55.95% over the last quarter. Currently, a significant portion of promoter holdings is pledged, which could exert downward pressure on the stock price in volatile or falling markets. This factor adds a layer of risk that investors should carefully consider alongside the company’s improving fundamentals.

Technical and Financial Summary

The upgrade to Hold is primarily driven by the improved technical outlook, with weekly indicators turning mildly bullish and monthly signals showing mixed but generally positive trends. Financially, the company’s recent quarters have demonstrated exceptional growth in sales and profits, supported by strong operational metrics such as ROCE and a debt-free balance sheet.

However, the long-term operating profit decline and promoter pledge risks temper enthusiasm, justifying a cautious Hold rating rather than a more aggressive Buy. Investors should weigh the company’s recent momentum against these structural risks when considering exposure.

Outlook and Investor Considerations

Looking ahead, Nazara Technologies’ upgraded Hold rating suggests that while the stock has stabilised and shows signs of renewed strength, it remains a stock for selective investors who can tolerate some volatility. The company’s strong recent earnings growth and improved technical indicators provide a foundation for potential upside, but the risks from promoter pledging and inconsistent long-term profitability warrant caution.

Investors should monitor upcoming quarterly results closely, particularly for sustained operating profit growth and any changes in promoter share pledging. Additionally, tracking technical indicators such as MACD and Bollinger Bands will be important to confirm whether the mildly bullish trend can strengthen into a more definitive uptrend.

In summary, Nazara Technologies Ltd’s upgrade to Hold reflects a balanced assessment of improved fundamentals and technicals against lingering risks, positioning it as a stock to watch rather than an outright buy at this stage.

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