Coconut is called God's fruit as it has three distinct eyes and hence relates to the three eyes of Lord Shiva representing the holy Trinity of Evolution: Creation, Preservation and Destruction.
Also the trinity of Ego, Maya and Karma, these three gives rise to obstacles, hence it become auspicious to break these. Only when maya/ego is smashed away one can taste the sweet untouched nectar of spiritual purity and bliss.
Act of breaking coconut thus become both, ritual as well as spiritual exercise.
Every Indian must grasp the inner meaning of offering a coconut to God. We never offer the coconut as it is. We remove the fibre that covers it and offer the fruit that is free from all the external fibre.
Only then is it possible to break the coconut. By breaking the coconut, the water in it flows out. The heart is the coconut and it is covered by the fibre of desire. The water that flows out is the 'Samskara' or purification. The fibres on the surface are the desires. We must strip the heart of all desires and offer the core without the fibre. It then becomes an offering to God.
If we plant a coconut as it is, in course of time and by watering it, another plant will grow out of it. At the time of germination, there is water in it. At that time, the kernel will be clinging to the sides of the fruit. The water in due time gets dried up and the kernel shrivels and begins to drift away from the external surface of the coconut. If we try to get the kernel out, plant it and water it, nothing will happen.
Our body may be compared to the shell and our life to the kernel. Our Samskaras are the waters inside the coconut. As long as there are Samskaras within us, the heart will cling to the body consciousness just as the kernel clings to the fruit..