Baahubali, or Bahubali, is a Sanskrit origin word which is used in many Indian languages, including Telugu and Hindi.
In Sanskrit, baahu means arm, and bal means strength. Hence baahubal means strength of one's arms. From this comes baahubali, which means one who has strength in his arms.
So, to put it simply, baahubali is someone who is strong, literally in the physical sense of the word, though the word is also used for people who are powerful, not necessarily through the strength of their own arms. A simple example can be of Saif Ali Khan's character in Omkara, who was called Langda Tyagi 'baahubali' by his supporters.
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