The 64% rally in Nykaa shares crowns the country the internet leader, but do rich valuations justify the risk-reward ratio?

Shares of FSN E-Commerce Ventures have staged a sharp comeback, rising 64% over the past year to emerge as the top performer in the internet space amid signs of an operational turnaround. However, Nykaa’s parent company’s valuations raise concerns about whether the current price offers a favorable risk-reward proposition and whether the stock has enough room for further upside potential.Nykaa’s high double-digit returns came at a time when markets were struggling due to external factors such as US tariffs, geopolitical tensions and the Fed’s status quo versus interest rate cut expectations. Internal factors include weak domestic earnings and premium valuations that have weighed on markets.

Sunny Agrawal, Head of Retail Fundamental Desk at SBI Securities, decodes the new found enthusiasm for FSN E-Commerce stock among the investors. According to him, Nykaa has delivered robust operating profit growth over the past five quarters on the back of robust EBIT margin expansion in both the BPC and fashion sectors.The company delivered stellar numbers in Q3FY26, reporting a 142% increase in consolidated net profit at Rs 63 crore, compared to Rs 26 crore in the same period a year ago. Nykaa operator’s revenue from operations stood at Rs 2,873 crore in the third quarter of FY26, up 27% from Rs 2,267 crore in the corresponding period of the previous fiscal.

The company has reported record high GMV (Gross Merchandise Value) and EBITDA margins, while improving balance sheet efficiency, with working capital reduced to 30 days, Agrawal noted. RoCE has improved to 19%, with financial and operational metrics improving overall over the past year, which he believes has led to a share price recovery.

Also read | Nykaa Q3 Results: Profits Soar 142% YoY to Rs 63 Crore; turnover increases 27%

Nykaa’s stock price journey so far

Nykaa’s Rs 5,350 crore IPO was launched in October 2021 with a price range of Rs 1,085-Rs 1,125. The stock debuted on a strong basis at a price of Rs 2,018, implying a listing premium of 79%. It then reached a lifetime high of Rs 2,089 on January 22, 2026.

The correction then set in, taking the stock to Rs 1,145 before a 5:1 bonus issue adjusted the price to Rs 167 on November 10, 2022.

The downward journey continued and Nykaa shares hit their all-time low of Rs 114.

The past year has been quite eventful with the strong rally in stocks, but 2026 has been a different story. The 2026 price remains flat versus the previous year, although the stock touched a 52-week high of Rs 286 this month.

Nykaa vs internet peers

Apart from Nykaa, only five other scrips in the 21-stock Nifty India Internet index have outperformed Nifty’s one-year return of 13%. One 97 Communications (Paytm), IIFL Capital Services, Motilal Oswal Financial Services (MOFSL), CarTrade Tech, Le Travenues Technology and Nazara Technologies have delivered returns superior to the main index over the same period.