For simplicity of math, let's use 40 Def/Res, 0% Elemental Resist/ other DR, 0 Armor/ Magic Armor, and a base value of 100 damage for both combattants. I know these are not representative of what you can actually expect to see (I mean, no armor at all?) but quite frankly, I'm coughing my own lungs up and too drained to do anything more complex than flat multiples of 5. Sue me.

- Enemy attacks Narcus user. Narcus user has 40 defense. Takes 60 damage instead of the 100 it would have.
- Narcus user counterattacks. The bonus damage us reduced by the target's 40 res. 60 base damage, plus 36 extra damage from the Narcus.
- "Omfg ran go take your meds, why didn't the Narcus User get hit twice!?" The important thing is the ratio of damage taken to damage dealt back. I'm too sick to draft up several realistic turn order scenarios with movement and crap. If both hit once or both hit twice, it's still the exact same Damage-to-hit ratio.
- "Omfg ran go take your meds, why does the Narcus user have defense!?" I'm getting to that soon, I promise.

Thing is, the Narcus's damage got reduced by 40% TWICE. Yes, still it's a definite advantage in favor of the Narcus user. But do consider...

- The Narcus Retaliation damage only applies "on hit" which means it will not apply on Crystal Rose, Shinken Shockwave, Retreating Swipe, Incise Chaser, Elemental Rave, Rising Tide, Sanguine Star, Most Kensei skills besides Wazabane if you were crazy enough to use them without a Katana, etc. As the vast majority of these do more damage than a normal attack - usually roughly 20% more, we need to consider if this outweighs the retaliation. (Almost, but not quite. It would if they had any other DR/ Fire Resist, though.)

- In order to actually do GOOD Narcus Damage, the Narcus Wieldier needs high HP and low Def/Res, no DR, and low Cel. This is incredibly risky, and gimmicky. Honestly, unless they have percentage based heals, like Malmelo or Prescribed Hi Potions, this is most likely a death sentence against another player with a good damage output and any fire resistance.

- Most races want Sanctity. Sanctity gives some free resists. Although Stab does do pierce damage instead of fire, the Retaliation damage will always be fire. This means that, except against humans and corrupted, the Narcus retaliation will always be doing less damage than the damage taken would suggest.

Yes, it's strong. But it's also very restrictive, and counterable.