Share Market News / Identify multibagger stocks in the crowd of stocks like this, you will get bumper returns

Share Market News: There are thousands of ways to invest in the stock market - some try their luck in penny stocks, while others look for multibagger stocks. But identifying the right multibagger stock in the crowd is an art that not everyone knows. On this, famous investment expert and co-founder of Motilal Financial Services, Ramdev Agarwal, has shared his experience and strategy in an exclusive conversation with ET.

Finding a multibagger is easy, but understanding it is difficult

Ramdev Agarwal believes that finding a multibagger stock is not a difficult task, but very few people know how to understand and trust it. He said that hardly anyone seriously understands the most powerful concept of investment "compounding" - not even in IIT class. Compounding is the secret of a real multibagger.

Two key elements: Early support and good management

According to Agarwal, there are two major factors behind any company becoming a multibagger:

Early support

Firm and honest management

When a company gets the right support in the early stages and is accompanied by strong leadership, it has the potential to give amazing returns to investors.

Example: The magic of compounding

Ramdev Agarwal explained that:

If a stock gives 25% annual return, then your wealth can grow 10 times in 10 years.

At 35% it can go up to 20 times and

at 45% it can go up to 40 times.

So if a stock can grow 40 times in 10 years, then it may be right to buy it a little expensive today, even if its P/E ratio is above 100.

Valuation game: Comparison with index and real estate

Ramdev Agarwal describes valuation as dynamic and comparative. According to him, it is just like the prices of real estate—the price of a new building is always higher than the old one. In the stock market too, valuations keep changing every day, every hour—based on news, sentiments and information.

Fundamentals are the real king in the long term

He said that retail investors can influence prices for a short period, but in the long run only fundamentals matter. Therefore, it is very important to understand the discipline of the market and the basic strength of companies.

Demat account boom: New revolution of investment

Ramdev Agarwal said that:

In 2020, there were only 2 crore demat accounts,

which have now increased to 20 crores.

But out of these, only 1 crore accounts are serious investors, who control about 90% of the total market value. This means that their decisions determine the real direction, while new investors can only bring temporary fluctuations.