Market capitalization is a measure of a company’s value and is calculated by multiplying the number of shares outstanding by the current market price of each share. It is a commonly used metric to assess the size of a company and to compare different companies in the same industry.
In the Indian stock market, market capitalization is an important factor that investors consider when making investment decisions. It helps investors understand the size and potential of a company, and provides information on the level of risk associated with investing in a particular stock.
There are four main types of market capitalization in the Indian stock market:
Large Cap: Companies with market capitalization over ₹10,000 crore are considered large cap in the Indian stock market. These companies are well-established, have a strong financial performance, and are often leaders in their respective industries. Examples of large cap companies in India include Tata Consultancy Services (TCS), HDFC Bank, and Reliance Industries.
Mid Cap: Companies with market capitalization between ₹2,000 crore and ₹10,000 crore are considered mid cap in the Indian stock market. These companies are often in a growth stage and offer potential for higher returns, but also carry a higher level of risk compared to large cap companies. Examples of mid cap companies in India include Bharat Petroleum Corporation Limited (BPCL) and Havells India Limited.
Small Cap: Companies with market capitalization under ₹2,000 crore are considered small cap in the Indian stock market. These companies are often in their early stages of development and offer high growth potential, but also carry a higher level of risk compared to large and mid cap companies. Examples of small cap companies in India include Shriram Transport Finance Company Limited and Steel Strips Wheels Limited.
Micro Cap: Companies with market capitalization under ₹300 crore are considered microcap in the Indian stock market. These companies are usually less established, have limited financial resources, and carry a higher level of risk compared to small cap companies.
When investing in the Indian stock market, it’s important to consider market capitalization as one of many factors in your investment decision. While companies with a higher market capitalization may offer stability and lower risk, they may not offer the same level of growth potential as smaller, riskier companies. On the other hand, smaller companies with a lower market capitalization may offer higher growth potential, but also carry a higher level of risk.