Why is Nazara Technologies Ltd falling/rising?

Strong Quarterly Results Fuel Investor Optimism

Nazara Technologies has recently reported very positive financial results for the quarter ended September 2025, which have evidently bolstered investor confidence. The company’s operating profit surged by an impressive 834.85%, signalling a sharp turnaround in operational efficiency. This growth is further supported by a substantial increase in net sales, which reached ₹1,545.43 crores over the nine-month period, reflecting an 85.03% rise compared to previous periods. Additionally, the company’s return on capital employed (ROCE) for the half-year stood at a robust 26.42%, underscoring effective capital utilisation. The net profit after tax (PAT) for the nine months also rose significantly to ₹954.67 crores, reinforcing the company’s improving profitability trajectory.

Market Performance and Technical Indicators

On the trading day of 29-Dec, Nazara Technologies outperformed its sector by 7.54%, marking a clear trend reversal after two consecutive days of decline. The stock touched an intraday high of ₹258.65, representing a 9.04% increase from previous levels. Despite this strong performance, the weighted average price indicates that more volume was traded closer to the lower price range of the day, suggesting some profit-taking or cautious trading. The stock price currently sits above its 5-day and 20-day moving averages but remains below the longer-term 50-day, 100-day, and 200-day averages, indicating a mixed technical outlook. Liquidity remains adequate, with the stock able to support trade sizes of approximately ₹2.09 crores based on recent average traded values.

Long-Term Growth and Risk Considerations

While the recent quarterly results have been encouraging, Nazara Technologies’ long-term growth profile presents a more nuanced picture. Over the past five years, the company’s operating profit has declined at an annualised rate of -176.29%, highlighting challenges in sustaining growth over an extended period. Furthermore, despite a 916.6% increase in profits over the last year, the stock’s return for the same period was marginally negative at -0.32%, indicating a disconnect between earnings growth and stock price performance. The company’s PEG ratio stands at zero, reflecting this disparity and suggesting that the stock may be trading at a premium relative to its earnings growth.

Promoter Share Pledging Adds to Downside Risks

Another factor weighing on investor sentiment is the high level of promoter share pledging. Currently, 55.95% of promoter shares are pledged, a proportion that has increased significantly over the last quarter. In volatile or falling markets, such high pledged holdings can exert additional downward pressure on the stock price, as promoters may be compelled to liquidate shares to meet margin calls. This elevated risk factor tempers the otherwise positive momentum generated by the company’s recent operational improvements.

Comparative Returns and Sector Context

Examining the stock’s returns relative to the benchmark Sensex reveals a mixed performance. Over the past week, Nazara Technologies gained 11.28%, significantly outperforming the Sensex’s decline of 1.02%. However, over the one-month and one-year periods, the stock’s returns were slightly negative or flat, contrasting with the Sensex’s positive gains of 8.39% and 7.62% respectively. Over a three-year horizon, the stock has delivered a strong cumulative return of 76.57%, nearly doubling the Sensex’s 38.54% gain, which highlights the company’s potential for long-term value creation despite recent volatility. The absence of five-year data for the stock limits a full comparison with the broader market’s 77.88% return over that period.

Conclusion: A Stock on the Rise but Not Without Risks

The sharp rise in Nazara Technologies’ share price on 29-Dec is primarily attributable to its strong recent quarterly results, marked by substantial growth in operating profit, net sales, and PAT. This positive momentum has helped the stock outperform its sector and reverse a short-term downtrend. Nevertheless, investors should remain cautious given the company’s poor long-term operating profit growth, the disconnect between earnings and stock returns, and the elevated risk posed by a high proportion of pledged promoter shares. These factors suggest that while the stock is currently on an upswing, it carries inherent risks that warrant careful consideration.

Get 2 full years of MojoOne Premium for only Rs. 12,999. Subscribe for 1 year and we'll add another year FREE. Offer valid for a limited time. Start Saving Now →