Understanding Market Capitalisation

What is Market Capitalisation?

What is Market Capitalisation?

• Capitalisation or ‘Cap’ is the market value of a stock, indicating the size of the stock available

Market Capitalization = Market price of the stock x The number of the stock's outstanding* shares* Indicates shares held by the public

Example - If a stock has a Current Market Price of Rs 20 per share, and there are 1,00,000 shares in the hands of public investors, then Stock A has a capitalization of 20,00,000

What does Market Cap actually mean?

What Market Cap Actually Means?

• The company's capitalization is an effective parameter to group corporate stocks

• Shares or stocks are classified into three categories using the concept of capitalization

• They are classified on the basis of the relative size of the market in that particular country

3 Types of Shares

3 Types of Shares

• Small – Cap Stocks

– The stocks of small companies that have the potential to grow rapidly are classified as small-cap stocks

– These stocks are the best option for an investor who wishes to generate significant gains in the long run

– Generally the companies that have a market Capitalisation in the range of upto Rs. 250 crores are small cap stocks

3 Types of Shares

• Mid – Cap Stocks

– These stocks are typically stocks of medium-sized companies

– These are stocks of well-known companies, recognised as seasoned players in the market. They offer you the twin advantages of acquiring stocks with good growth potential as well as the stability of a larger company

– Generally, these companies have a market capitalisation in the range of Rs. 250-4000 crores

3 Types of Shares

• Large – Cap Stocks

– These stocks of the large companies such as Tata, Reliance, ICICI are classified as large-cap stocks

– Investors gain the advantages of reaping relatively higher dividends compared to small and mid-cap stocks while also ensuring the long-term preservation of their capital

Did you know?

In India, the market capitalisation of listed companies is around $600 bn while that of US markets is $15 trillion

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