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Market Capitalization: Basics & Categories

Market capitalization

Every time you go onto the stock quote of the companies, you must find market capitalization. It’s important to know what is market capitalization. Because this number can tell you a lot about a company.

Market capitalization, sometimes called a market cap, is the share price multiply by the outstanding shares of the company.

In simple words, it’s just the size of the company. Or the market value of all common shares traded in the stock market.

The formula of market capitalization is-

Market Capitalization = Current Market Price Per Share / Total Number Of Outstanding Shares

Let’s understand with an example, suppose a company has 10 million outstanding shares. And the price per share is 100 rs. Thus if we multiply 1,000,000(total no. of outstanding shares) to 100(current market price per share) then we come up with a market capitalization that is 1 billion.

Categorized Of Market Capitalization

In the stock market grouping is used to categorize stocks by their market capitalization. These categorized are-

  • Large-cap: 20,000 crores and over
  • Mid-cap: Between 5,000 crore and 20,000 crore
  • Small-cap: 5,000 crores and below
  • MIcro cap: 1,000 crores and below

Each category tells you a lot about its prospects. You can get lots of ideas of a company from just checking categorized of market capitalization.

Large Cap

Large-cap, as the name suggests, is the biggest companies trade in the stock market. These are the company’s you used the product most or see around people using it.

It tends to be the safest investment in the stock market. because it has established a presence and reliable sales and profits than smaller companies. Thus its grabs the most attention from the stock market.

These companies make less risky investments than smaller company’s. Thus it has low growth rates.

Many large-cap companies offer a steady source of income through dividends. This steady source of income attracts more investors. because it’s balanced out low growth rates potential.

Examples of large-cap stocks include Reliance with a market capitalization of Rs.1,583,471 crore, TCS with Rs.1,341,645 crore, HDFC Bank with Rs.797,914 crore, Infosys with Rs. 764,875 crore, HUL with Rs. 534,426 crore, and ICICI Bank with Rs.505,903 crore as of 22/12/2021.

Mid Cap

Mid-cap stocks are lower than large caps and bigger than small caps. These companies grow faster than large caps.

These mid-caps offer a distinct advantage to the investors. Therefore, you will not hear much about them. They often get overlooked. because most of the news channels and analysts don’t pay attention to it.

They offer a higher return and sustained growth than large-cap companies. It’s also come up with a risk that is greater than large-cap and less than small-cap.

Examples of mid-cap companies include Procter & Gamble health with a market capitalization of Rs.8,420 crore, Aegis Logistics with Rs.7,673, Balrampur Chini Mill with Rs.6,279 crore, Century textile & Ind with Rs.8,962 crore, and EPL with Rs.6,428 crore as of 22/12/2021.

Small-Cap

Small-cap that has survived and completed their start-up phase. It can be tomorrow’s leader or maybe a loser.

They have very limited resources than mid and large-cap companies. Often these are new companies in the industry.

Overall, these stocks are very risky and volatile than other categories of stocks.

If you’re not knowledgeable enough to analyze a stock or you don’t have time for it, consider investing through mutual funds or ETFs that invest in small-cap companies.

Examples of small caps stock include the Suumaya industry with a market capitalization of Rs.826 crore, KSE with Rs.645 crore, and NDTV with Rs.812 crore as of 22/12/2021.

Micro Cap

Micro-cap stocks are shares in companies that have very low market values. lesser than small-cap companies. It is very risky and volatile.

These stocks are mainly traded in the over-the-counter markets. Sometimes they are very small companies thereby they don’t even need to register at a stock exchange. Therefore micro caps trade in OTC markets.

Examples of micro-cap companies include Welcure Drugs with a market capitalization of Rs.11 crore, Goenka business with Rs.13 crore, and Bodhi Tree with Rs.19 crore as of 22/12/2021.

Conclusion

These are all categorized stocks by market capitalization that trade on the stock market. Consider including all categorized stocks in your investment portfolio directly or indirectly. indirectly through mutual funds and ETFs.

 

 

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