logo
Raamdeo Agrawal reveals his simple 2-step formula for finding multibagger stocks

Raamdeo Agrawal reveals his simple 2-step formula for finding multibagger stocks

Economic Times10 hours ago

In a market teeming with noise, legendary value investor and Motilal Oswal Financial Services co-founder Raamdeo Agrawal believes the formula for spotting the next multibagger is surprisingly simple but understood by very few.
ADVERTISEMENT 'No one really understands compounding,' Agrawal said in a candid conversation with ET Markets. 'Even in an IIT class, maybe just one person gets it.' The power of compounding, he said, is rarely appreciated because 'you cannot see the future.'
The billionaire investor broke down his multibagger framework into two key factors: early-stage tailwinds and good management. 'When there is a combination of good management and tailwind, and you are in the early stage of that tailwind, you are sitting on a multibagger formula,' he said.
Agrawal emphasized that compounding remains a mystery even to those trained in the best institutions. The reason? It deals with the future — something abstract and often uncomfortable for most people to internalize. 'If I understand compounding and others don't, I'm like a one-eyed king among the blind,' he quipped.
Also read | Sensex will hit 1.5 lakh by 2030 & 3 lakh by 2035! Raamdeo Agrawal makes big prediction
To illustrate its power, he offered simple math: A 25% annual return multiplies wealth tenfold in ten years. At 35%, it's 20 times. At 45%, the return becomes 40x. That's the wealth creation potential he believes more investors need to grasp — not just theoretically, but with conviction.
ADVERTISEMENT
Agrawal also addressed how to value fast-growing businesses. If a stock can grow earnings 40x over a decade, it makes sense to pay a premium upfront — even a P/E ratio of 100, he said.
ADVERTISEMENT 'You start by looking at the index valuation,' he explained. 'If the market gives 15% return at 20 P/E, then you must reward companies with higher growth prospects with higher multiples.'Valuation, according to him, is always relative and dynamic. 'There's no absolute value in the world. It's like real estate. You want to know the value of a new building? You look at the old one next door.' Market prices, he added, get reset daily, sometimes hourly, based on fresh information and sentiment.
ADVERTISEMENT Asked about the frothy valuations of certain smallcaps in the recent bull market, Agrawal was unequivocal: 'They were all wrong, and they will correct.' Valuations may vary among investors, he admitted, but not by absurd degrees. 'If I say the price should be ₹300, my friend may say ₹350–400. But if someone says ₹4,000, then either you come to my place for tea, or I'll come to yours. We need to reconcile.'This, he explained, is where market discipline eventually kicks in. Retail exuberance can distort short-term prices, but long-term fundamentals prevail.
ADVERTISEMENT India's retail revolution has changed the character of its stock market. From just 2 crore demat accounts in 2020, the figure has exploded to 20 crore today. But Agrawal noted that beneath this surface lies a sharp divide.'The real control is still with the one crore serious investors,' he said. 'They own 90% of the market. The remaining 90% of demat holders own just 10%. So while the new entrants may create volatility, they don't control direction in the long run.'Still, he acknowledged that this influx has made the market more unpredictable in the short term. 'You're now dealing with a disproportionately large number of misinformed or ill-informed traders.'Agrawal believes all valuation metrics are valid — depending on the investor. 'There are four or five moving parts: sales growth, profit growth, ROE. These are core. Then valuation depends on your perspective.'For a pension fund from Canada, a 5% dollar return may be sufficient. For an Indian investor, the bar is higher — maybe 18%. 'This market is made up of everyone,' he said, adding that one yardstick won't work for all.The human tendency to group companies — like "cement stocks" or "banking stocks" — may help simplify investing, but Agrawal warned that each company is unique. 'You have to understand that uniqueness to value it. Every cement company is different. Every bank is different.'This depth of understanding is often what separates successful investors from the rest.Agrawal sees the current market as being held up by consistent domestic inflows and a relatively benign macro backdrop. 'The Pakistan tension is gone. Oil at $60–70 is fantastic for India. It changes our trade balance and strengthens the rupee,' he said.He also noted the mean reversion underway. 'Last year, the index rose just 7–8% while portfolios were up 25–30%. I had warned of reversion to mean — and it's playing out now.'The biggest takeaway? Don't try to time the market every day. Instead, look for businesses with early-stage tailwinds and strong leadership — then stay invested.'The real money is made by holding long term,' Agrawal said. 'If you want a multibagger, look for the tailwind before it becomes obvious.'
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
(You can now subscribe to our ETMarkets WhatsApp channel)

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Indian stocks remain in green for fourth day; Sensex jumps 256 points
Indian stocks remain in green for fourth day; Sensex jumps 256 points

India Gazette

time2 hours ago

  • India Gazette

Indian stocks remain in green for fourth day; Sensex jumps 256 points

Mumbai (Maharashtra) [India], June 9 (ANI): The Indian stock indices ended on a positive note on Monday, rising for the fourth straight session, continuing to take cue from the RBI's decision to cut repo rates by 50 basis points. The Sensex closed at 82.445.21 per cent, up 256.22 points or 0.31 per cent, while Nifty closed at 25,103.20 points, up 100.15 points or 0.40 per cent. 'Financial stocks extended their rally in Indian markets, driven by the RBI's supportive aggressive policy of rate and CRRA cut. These actions have boosted investor confidence and are expected to enhance liquidity in the near to medium term, especially in midcaps,' said Vinod Nair, Head of Research, Geojit Investments Limited. All the Nifty Sectoral indices ended their day in the green territory except Nifty Realty. Out of all the sectors, Nifty Financial Services Ex-Bank was the top mover, followed by Nifty PSU Bank and Nifty Oil & Gas. 'Banking stocks were the standout performers of the session, with the Bank Nifty index extending its rally to hit a fresh all-time high. For the first time ever, the index breached the 57,000 mark, underscoring the market's optimism following a surprise 50 basis points cut in the repo rate and a simultaneous reduction in the Cash Reserve Ratio (CRR) by the Reserve Bank of India (RBI),' according to Bajaj Broking Research. According to the latest US jobs data, employers added 1,39,000 jobs last month. Average hourly earnings increased 0.4% in May against a rise of 0.3%, as reported by Reuters. 'The positive US jobs data and renewed optimism over U.S.-China trade talks lifted global sentiment. Domestically even large caps expressed renewed momentum led by FIIs inflows,' Vinod Nair added. On Friday, RBI decided to reduce the policy repo rate under the Liquidity Adjustment Facility by 50 basis points to 5.5 per cent. This rate cut was accompanied by a cut in the Cash Reserve Ratio (CRR) by 100 basis points in four tranches of 25bps each. (ANI)

Shares of Eternal, Swiggy drop as Rapido undercuts food delivery commission
Shares of Eternal, Swiggy drop as Rapido undercuts food delivery commission

Time of India

time2 hours ago

  • Time of India

Shares of Eternal, Swiggy drop as Rapido undercuts food delivery commission

Shares of Zomato parent Eternal and its rival Swiggy dropped as much as 2.5% and 4% on Monday following an ET report that Rapido is planning to launch its food delivery services this month by charging significantly lower commissions to restaurants than the two large players. Eternal shares closed 1.9% lower on the BSE at Rs 256.99 per share, after hitting an intraday low of Rs 255.35. Swiggy ended the day's trade 2.8% lower at Rs 364 a share, falling to Rs 360.10 apiece earlier in the day. The benchmark Sensex closed 0.31% higher at 82,445.21. According to the agreed-upon terms with the industry body National Restaurants Association of India (NRAI), Rapido will charge a flat commission of Rs 25 for all orders below Rs 400 and Rs 50 for orders worth more than Rs 400. This translates to 8–15% commission from restaurants, compared to 16–30% that Zomato and Swiggy charge, as ET reported. Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like The Top 25 Most Beautiful Women In The World Articles Vally Undo Rapido's food delivery launch comes at a time when restaurants have been increasingly flagging issues of 'steep charges' levied by Zomato and Swiggy. "Zomato is becoming unsustainable for small restaurant owners like us," Vandit Malik, founder of The Garlic Bread, wrote on LinkedIn three weeks back. "To even be visible on the platform, I'm forced to spend Rs 30+ per order on ads. What's left? Pennies. Sometimes, not even that," he alleged. The owners of another NCR-based small restaurant, Saffroma, wrote on X last week, which went viral, that it was quitting Zomato, alleging "zero payouts, mystery service charges and advertisements initiated without approval." The post has since been deleted. Live Events Food delivery outlook Discover the stories of your interest Blockchain 5 Stories Cyber-safety 7 Stories Fintech 9 Stories E-comm 9 Stories ML 8 Stories Edtech 6 Stories India's online food delivery market is expected to more than double to $15 billion by March 2029, according to a December 18 report by JM Financial . Platforms had penetrated only about 11% of the country's total food consumption in 2023, compared with 40% in China and 58% in the US, it said. In a note dated June 2, brokerage firm Morgan Stanley said that online food delivery penetration in India is still in the early stages at around 14% against the 19-21% range for markets such as the US and China, "implying a long runway for growth'. It kept its target price for Eternal's stock at Rs 320 per share, implying a potential upside of 24.5% from the stock's current price. Initiating coverage on Swiggy earlier this month, the brokerage firm pegged its target price for the stock at Rs 405 per share, marking a potential upside of 11.3%. Swiggy's food marketplace CEO Rohit Kapoor, in an interview with ET this month, said that there was a need for a greater level of dialogue between restaurants and aggregators over issues such as platform commissions, but pointed out that the architecture of economics has changed over time. Swiggy is an investor in Rapido.

Sebi Imposes Rs 3 Lakh Penalty on Motilal Oswal Financial Services for Stock Broker Norm Violations
Sebi Imposes Rs 3 Lakh Penalty on Motilal Oswal Financial Services for Stock Broker Norm Violations

Economic Times

time2 hours ago

  • Economic Times

Sebi Imposes Rs 3 Lakh Penalty on Motilal Oswal Financial Services for Stock Broker Norm Violations

Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel Markets regulator Sebi on Monday imposed a penalty of Rs 3 lakh on Motilal Oswal Financial Services Ltd for violating stock brokers' fine needs to be paid within 45 days, the Securities and Exchange Board of India (Sebi) said in its regulator conducted a thematic inspection of Motilal Oswal Financial Services Limited on the theme 'Control over Authorized Persons' for the period from April 2022 to January its probe, Sebi found that trading terminals were not found at authorised places."During inspection, 13 terminals ( NSE ) were not found at the reported location. Further, on verification of trade data as on 04-03-2024, it was observed that trades have been executed from 5 out of 13 terminals, 9 terminals ( BSE ) were not found at the reported location, and trades have been executed from 1 terminal," Sebi inspection on Verification of terminals (NSE), it was observed that 4 terminals were not operated by approved users to whom the terminals were allocated. Also, it was observed that 4 trading terminals (BSE) were operated by users other than the approved users, it the rule, a stock broker's hall will be liable for a monetary penalty in respect of extending the use of trading terminals to any unauthorised person or Sebi noted that Motilal Oswal Financial Services had conducted the onsite inspection of two APs (Authorised Persons) and had submitted the inspection report to BSE and NSE. However, it failed to identify fund-based activities during AP inspection and did not report fund-based activities between AP and the client to NSE in the MIS (Margin Intraday Square off) Oswal Financial Services' AP -- Triventure Services -- had fund-based relationships with 36 registered clients, wherein 18.31 crore have been received and payments amounting to Rs 1.24 crore have been made. In case of another AP -- Merit Capital Market Services, 99 clients' transactions were observed out of total transactions with 228 entities, amounting to Rs 5.69 crore payment to clients and Rs 5.06 crore received from clients."Both the APs had a fund-based relationship with the clients. Thus noticee (Motilal Oswal Financial Services) did not ensure that its APs are engaged only in permitted activities and are not undertaking any business which are disallowed under the Byelaws, Rules & Regulations and circulars of Sebi/exchanges," Sebi said in its such activities, Motilal Oswal Financial Services violated stock brokers' rules and accordingly imposed a penalty of Rs 3 lakh for the violations.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store