Are SIP portfolios the goldmine for multibagger seekers?

When talking about multibagger, a Bollywood dialog by Deepika Padukone from the movie Om Shanti Om comes to my mind, “Ek chutki sindoor ki keemat tum kya jaano Ramesh babu“. I do not know what is the price of sindoor in Ramesh babu’s eyes but every investor like me would know the keemat of a multibagger.

The gurus or demi-gods of the market have undoubtedly been the guys who have managed to figure these stocks, kept them for a while and then sold them at the “correct” time. Multibagger stocks deliver astonishing returns in few months or years.

Take for example Sesa Goa shares taken by India’s “Warren Buffet”- Rakesh Jhunjhunwala. He bought the shares at around Rs 25, sold some at around Rs. 65, a part around 150, another part around Rs. 2200 in few years. That is a kind of return the big bull of Indian stock market made in it. Another example of the ace stock picker is of Lupin. Rakesh Jhunjhunwala, or RJ as he is known to be, sat on 138 times profit by holding shares of Lupin for around 13 years!

The multibagger journey of Porinju Veliyath, a Kerala born value investor, is also interesting one. Hailing from humble background, he has featured in the Forbes wealth wizard. He is super bullish on Indian equities and believe that select stock picking in Indian Equities can give mega returns. To check how his stock picking has given returns, have a look at this tweet of him.

My Portfolio never looked ‘good’; few clients have terminated PMS just because I bought Kitex@5, Wockhardt@120 & Shreyas@20 at that time!

— Porinju Veliyath (@porinju) July 22, 2015

Porinju Veliyath bought Kitex at Rs. 5 sometime around 2009 and in July 2015 the stock was at Rs. 1070. That’s a breathtaking return (214 times).  In other words, if you invested just Rs. 10,000 in 2009 following Porinju, you would have made Rs 21,40,000! Wockhardt & Shreyas Shipping have also given good returns in a short span of time.

Now, these two stalwarts have been vocal on Mutual Funds in recent times. Both of them have talked about how it is getting tougher every passing day to find the next multibagger. And both of them have talked about how investors should focus on “compounding” returns.

Government and SEBI have been propagating a lot on investments in the country and small investors are the key. With many people in lower middle class and middle class have shown a lot of interest in getting into the markets, the portfolio of fund managers are bound to shoot North. There are a lot of products in market now. SIP or systematic investment plans are widely accepted by small investors. Apart from tax saving, investing in such schemes are safer and this is one of the reasons why people are investing in mutual funds.

Add to that, presently Indians invest less than 10% of their money in Mutual funds and rest in equities. This trend is expected to get reversed or at least the ratio is expected to improve on the side of mutual funds. Moreover, the reducing interest rates across the banking instruments are prompting saving focused people to look for other options and Mutual Funds are one of the best ones available. Considering the above facts and looking at the kind of investments India is poised to get, mutual funds may turn to be a real goldmine for multibagger hunters.