If you are new to the stock market, you must have heard the word Market Capitalization many times – commonly known as market cap. It is a Important Data seen before investing or trading in any company that affects the Decision of every investor. So today we will learn in this post what happens Market Cap, how it is calculated and why is it so important?

What is market cap?

Content Inside

What is Market Cap
How is the market cap calculated?
India's Top 10 High Market Cap Companies
How many types of market caps are there?

1. Large Cap

2. Mid Cap

3. Small Cap

Why is market capitalization important?

What is market cap?

"Market cap simply means Total Market Value". Which is derived by multiplying the total number of Outstanding Share issued by that company with the Actual Share Price currently running.

This reveals the Size of the Company, with the help of which the investor can guess the Future Potential and invest keeping in view the Risk & Reward.

For Example: If at present 1 share price of Reliance is rs ₹200 and a total of 10,000 shares are issued by Reliance, the total market cap of Reliance will be = Rs ₹20 lakh (₹200×10,000)

How is the market cap calculated?

It has a simple formula –

[Market Capitalization = Current Share Price x Total Outstanding Shares]
[Market Capitalization = Current Share Price x Total Shares Issued by the Company]

Current Share Price – The Running Price of any company that is running during the open market (9:15 am to 3:30 pm) is called current share price. It is constantly changing on the basis of demand-supply, company growth, financial data and many other factors.

Outstanding Shares – Outstanding shares mean the total authorized shares issued by Kapni which are available with all types of investors, promoters, officers, employees. This does not include Treasury Shares which have been Buyback by the company.

India's Top 10 High Market Cap Companies

(List Updated: 4 April 2021)


Reliance Industries Ltd	₹13,28,134
Tata Consultancy Services Ltd	₹11,70,750
HDFC Bank Ltd	₹8,19,612
Infosys Ltd	₹5,90,187
Hindustan Unilever	₹5,63,685
ICICI Bank Ltd	₹4,11,087
Kotak Mahindra Bank Ltd	₹3,57,632
State Bank of India	₹3,30,791
Bharti Airtel Ltd	₹2,86,025
ITC Ltd	₹2,70,856

How many types of market caps are there?

Market Capitalization is divided into a total of 3 parts to compare any company–


Large Cap	₹20,000cr ++
Mid Cap	₹5,000 cr to 20000cr
Small Cap	₹5,000cr >>

1. Large Cap

Large CAP companies include companies with a total market capitalization of more than Rs ₹20,000 crore. Usually where does these Blue Chip Stocks go which has been performing quite well in the stock market for the last one or two decades and provides constant returns to investors.

Such companies remain stable even in times of recession and keep themselves in profit| At present, more than 180 companies have been listed as Large Market Cap companies in the Indian stock market. For example, in Nifty 50 Companies, all the companies come in large caps.

2 Mid Cap

The market cap of these companies ranges from Rs.₹5000 crores to Rs.₹20,000 crores|It is a little Risky to invest as these companies have more Volatility than Large Cap.

But coming to the second aspect of the coin, these companies are considered Near Leader and the chances of high growth and formation of a large cap company are high in Long-Run as soon as they see the Future Potential.

Companies like LIC Housing Finance and Castrol India are an example of this.

3. Small Cap

The total listed companies in the stock market Small Cap Compnies 80% to 90%, with a market cap of less than Rs.5000 crores. Being small in size, they also have high Growth Possibility due to which most Retail Investor invest in it.

But the fact is that small Market Cap causes a lot of volatility and risk, which prevents itself from being stable in the negative market and goes down.

Why is market capitalization important?

The market cap represents the Actual Size of any company so that investors can find out the Risk Taking Ability by comparing the two companies and take the right investment decision. At the same time, the market cap has a direct connection with the company's growth, future publicity and returns,

i.e., the higher the market cap = the better the growth potential.

Most cases have seen that large cap companies give a stable return with low risk.

About

Hi , This is Pramod Choudhary from Nagaur Rajasthan India. I an student and I would like to share my positive thinking with everyone that's my passion . Thank you