As of 9:40 AM, Nykaa shares were trading at Rs 247.10 on the NSE, down 3.02% or Rs 7.70 from the previous close of Rs 254.80. The stock had opened lower and slipped further during the morning session.

Brokerage downgrade weighs on sentiment

One of the key reasons behind the decline is caution from global brokerage firm Macquarie, which has reiterated an "Underperform" rating on Nykaa.

The brokerage set a target price of Rs 210, implying potential downside from current levels. Macquarie highlighted concerns around the sustainability of growth, particularly from the company's in-house brands, while also pointing to relatively expensive valuations.

Nykaa currently trades at elevated valuation multiples compared with many peers, which has triggered profit-booking after the stock's strong rally over the past year.

Broader market pressure adds to decline

The decline in Nykaa shares also comes amid weakness in the broader Indian equity market. The Nifty 50 has been under pressure due to global risk-off sentiment driven by geopolitical tensions in the Middle East and rising crude oil prices.

Consumer discretionary companies such as Nykaa are particularly sensitive to economic uncertainty and changes in spending patterns, which can impact demand for beauty and fashion products.

Recent stock performance

Nykaa shares have corrected after a strong rally earlier in the year. The stock had previously climbed to a 52-week high near Rs 285-286, driven by improved financial performance and growth in its beauty business.

However, the recent pullback reflects a combination of valuation concerns, mixed brokerage views, and broader market volatility.

Long-term outlook remains tied to beauty segment growth

Despite the short-term pressure, Nykaa continues to benefit from strong demand in its core beauty segment, particularly in skincare categories and owned brands.

The company has also reported solid operational performance in recent quarters, including revenue growth and improving margins. However, near-term stock movement appears to be influenced more by valuation debates and macroeconomic factors rather than any major company-specific negative development.

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